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Stocks came into 2026 riding AI momentum, a more stable trade environment, and hopes for lower interest rates. The S&P 500 hit a record high in late January.
With two trading days left in the first quarter, the situation looks significantly more challenging.
The stock market looks broken, and it’s far from clear as to how to fix it.
The S&P 500 (^GSPC) is down over 7% for the year. The Nasdaq (^IXIC) is in correction territory. The VIX (^VIX)— known as Wall Street’s “fear index” — is trading at its highest level in a year, cresting the 30 mark.
Bond yields (^TNX) are soaring. Gold (GC=F) is off $500 from its record high reached in January. Bitcoin (BTC-USD) is languishing near $65,000. International stocks are underperforming US stocks once again. And markets have taken the possibility of rate cuts this year completely off the table; a rate hike in 2026 now seems more likely than a cut.
Geopolitical headlines continue to overwhelm the news flow, but little this week seemed to arc toward either outcome on the energy front. And experts from inside the industry still think the risks from this conflict are being understated by markets.
For most of the past three years, stock market bulls have had multiple levers to pull to make their case — AI spending, earnings growth, and lower rates chief among them. In 2026, these catalysts have lost their juice.
And so many of the new developments crossing investors’ radars — software getting replaced by AI agents, private credit funds gating redemptions — have simply added to a growing list of negatives.
There is a Warren Buffett quote for every market environment.
Many readers breezing through this gloomy summary of the market will be quick to pull one of his most famous — “Be greedy when others are fearful.”
On Thursday, one of our favorite market voices — Truist Wealth chief investment officer Keith Lerner — did just about this, telling clients in a note that “measured cash deployment is warranted.”
This is wealth adviser speak for: “Don’t be afraid of the stock market.”
Torsten Sløk, chief economist at Apollo, argued the market’s reaction to the US-Iran conflict is an overreaction.
(Disclosure: Yahoo is a portfolio company of funds managed by affiliates of Apollo Global Management.)
“Markets are overreacting to what will likely be a 4- to 6-week period of volatility, which will ultimately result in 50 years of stability in oil markets, supply chains and geopolitics,” Sløk wrote.
In his view, inflation’s rise will be temporary, rates will head lower, and the AI tailwind for the US economy won’t be taken off course by this conflict.
An outline of what’s happening in markets right now doesn’t have much good to offer, but putting it all down in one place does offer a glimpse of what is needed to turn things around.
And the Sløk outline, let’s call it, says that what risk assets — the stock market, bitcoin, etc. — need to see in order to work again is, at a minimum, stabilizing oil prices, preferably a decline in oil prices. Until then, we hold on.
Myles Udland is Yahoo Finance’s Head of News.
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