Selloff Intensifies as Wall Street Marks the End of the Cutting Cycle: March 20, 2026

An extended period of oil prices hovering near $100 has Wall Street marking the end of the cutting cycle as the Iran war continues with ongoing attacks on critical infrastructure for crude and natural gas production. As a result, Fed watchers believe that the next central bank rate change will be a hike rather than a reduction. Participants are indeed assigning a 50% chance of such an action by October, which has stocks facing heavy losses as the broadening trade that drove equities to fresh records earlier in the year crumbles on the back of tightening financial conditions, margin pressures and a lift in slowdown anxiety. The toxic combination has analysts worried about firms being able to achieve top line buoyancy in an environment of consumer capacity concerns, while profits could also be adversely impacted by heavier costs for fuel and interest expenses. In equities, ten of 11 sectors, every subcategory and major benchmarks are retreating while commodities are also declining, although shares and futures contracts associated with energy are rallying. Treasuries are getting crushed, of course, as shorter tenors and duration climb relatively evenly across the curve in light of a greater anticipation that a Warsh led institution would raise yields against the backdrop of loftier inflation expectations. The landscape has the greenback advancing while volatility protection instruments are seeing growing premiums.

Wall Street Prospects Worsen Every Day the War Continues

Investors initially thought that the Iran war would be short, believing that the Trump administration would do whatever it can to lighten the adverse impact of rising oil prices as the GOP’s midterm election odds worsen by the day. But with aggressions intensifying amidst no light at the end of the tunnel, the pain on Wall Street continues as shareholders and owners of fixed-income assets get battered simultaneously. The financial market volatility is similar to the aftermath of Russia’s invasion of Ukraine in 2022. Four years ago, the surge in energy costs drove the Fed to raise rates 525 basis points, contributing to pressures on revenues and profits across Corporate America that led to an earnings recession and two consecutive quarters of economic contractions that were later revised away. For now, however, if Washington doesn’t step in and settle things down in the next few days, then equities are poised to have a typical 10% correction, which wouldn’t be the worst thing in the world if the second half of the year offers peace in the Middle East alongside a cyclical reacceleration that drives modest capital gains for 2026.

International Roundup

Euro Area Trade Swings to Deficit

After hitting a €11.2 billion trade surplus in the last month of 2025, the euro area recorded a €1.9 billion deficit in January, according to a preliminary estimate from Eurostat. Economists anticipated that exports by countries that have adopted the euro would exceed imports by €12.8 billion. On a year-over-year basis (y/y), the deficit was up by €0.5 billion with exports and imports slipping 7.6% and 7.3% y/y. Regarding shipments to foreign customers, the surpluses for the chemicals and related products category and the machinery and vehicles group sank from €24.6 billion and €5.6 billion to €16.7 billion and €1.6 billion in January 2026. The deficit for energy products, conversely, sank from €26.2 billion to €19.2 billion y/y. Relative to December, the euro area’s deficit was driven by the surplus for the machinery and vehicles category falling from €13.2 billion to €1.6 billion.

In a similar manner, the European Union (EU), which is a broader political and economic alliance than the euro area, saw its trade deficit move from €5.4 billion to €5.9 billion y/y. Among trading partners, the EU’s surplus with the US sank from €18.1 billion to €9.2 billion, largely due to the North American country implementing import tariffs.

China Holds Key Interest Rates

The People’s Bank of China (PBOC) yesterday joined a long list of central banks that have decided to maintain their benchmark interest rates as uncertainty about the duration and intensity of the Iran war clouds the outlook for inflation and economic growth. The action marks the 10th consecutive month of no changes to the organization’s short-term cost of capital. China’s current one-year and five-year loan prime rates are 3% and 3.5%. The country set a gross domestic product growth target range of 4.5% to 5%. Its economy expanded 5% last year. The PBOC’s decisions follows similar decisions this week by the Bank of Canada, the European Central Bank, the Bank of England and the Federal Reserve.

Hong Kong Inflation Accelerates

Hong Kong’s Consumer Price Index depicted prices in February climbing 0.50% month over month (m/m) and 1.7% y/y following the m/m and y/y results of 0.2% and 1.1% in January. In addition to accelerating from January’s result, the y/y print exceeded the economist consensus estimate for 1.6%. The special administrative region’s Census and Statistics Department notes that the y/y acceleration of price pressures was driven by higher charges for travel packages and inbound and outbound travel. Additionally, the 2025 Lunar New Year celebration and its accompanying price increases occurred during the first month of the year, unlike 2026 when the event was observed in February. As a result, prices in February weren’t inflated due to the holiday, creating a lower base comparison.

Singapore Labor Shortage Worsens

Tight labor conditions in Singapore intensified during the final quarter of last year with the unemployment rate holding steady at 2% and matching the economist consensus estimate. During the three-month period, the job vacancies to unemployed persons ratio climbed from 1.50 to 1.58 and the number of open positions increased by 8,100, according to the Ministry of Manpower. Payrolls, furthermore, grew by 17,700 workers. It was the 17th consecutive quarter of expansion. For the full calendar year, employment growth among residents increased by 11,600 with demand driven largely by the financial services and the health and social services sectors. Among non-residents, employment climbed by 43,900, primarily a result of hiring in the construction industry.

Canada Retail Sales Grow on Demand for Autos

Retail sales in Canada climbed 1.1% m/m in January after dropping 1.6% in December. Growth was led by a 2% jump in sales of motor vehicles and parts. The country’s core retail sales, furthermore, were up 0.9%, which also reversed from a 0.4% decline in December but missed the economist estimate for a 1.2% advancement. For this benchmark, general merchandise retailers and the group consisting of sporting goods, hobby, musical instrument, book, and miscellaneous retailers experienced sales ascents of 3% and 2.6%.