For much of this year, the financial story has been relatively calm. Consumer spending has remained strong; the economy has continued to grow — albeit at a slower pace — and inflation pressures appeared manageable. Overall, things were progressing pretty much as expected. But, as I mentioned in last month’s newsletter, the biggest risk to this calmness wasn’t economic, it was geopolitical. In March, that risk became a reality.
The escalation of our conflict in Iran disrupted global markets, due mainly to concerns around oil supplies with the closure of the Strait of Hormuz. As a result, oil prices surged above $100 per barrel, which in turn sparked renewed fears about inflation.
That shift had a direct impact on interest rates. Even though the Federal Reserve held steady on short-term rates at their March meeting, the 10-year government bond rose significantly from 3.93% at the end of February to 4.32% by the end of March.1 That’s a big jump in a short period of time. And, as Warren Buffett accurately noted, when interest rates go up, the value of all financial assets goes down. That includes stocks, which is why Wall Street had its worst month since March 2022, with all three major indexes down by around 5%.2
What it Means for You
As for our portfolios, income investors fared better than the markets overall, but no one escaped the situation entirely. As you’ll see from your latest statement, after being up approximately 1% through the end of February (and on track toward our long-term 6% annual target), our average conservative portfolios of bonds and bond-like instruments declined by about 2.5% in March, putting us now down by about 1.5% for the year.
While it’s never pleasant to see your values drop on paper, it’s always important to understand what’s driving the loss, and to remember what has not changed. That, of course, means your income.
Even though your values may fluctuate on paper, your interest and dividend return remain steady, which is why you chose this strategy in the first place. And if you’re retired and drawing income, that consistency is what matters most. If you’re still working and reinvesting, this environment actually allows you to purchase more shares at lower prices, positioning you for greater income and growth potential when markets stabilize.
Here is another important point. March also provided a great example of how our approach to diversification can work well on your half thanks to one particular asset class: business development companies. While BDCs had struggled earlier in the year when rates were declining, they rebounded in March — up over 2.5% — as rates moved higher.
So, in a month when nearly all asset classes were under pressure, that rebound in BDCs helped cushion the average impact on our portfolios. It also offered a reminder of why we don’t rely on any single strategy or asset class but diversify in order to help maximize both performance and protection.
Looking Ahead
Market reactions to geopolitical events, while often sharp, are typically short-lived compared to longer-term economic disruptions such as the financial crisis or the bursting of the tech bubble. Over the decades, we’ve seen this play out many times. So, unless the situation in Iran escalates into something far more prolonged — which is not expected — history suggests that markets will normalize once the situation shows signs of coming under control.
Still, if your latest statement gives you pause, that’s understandable. Just remember to take a deep breath and separate short-term volatility from your long-term strategy. Remember further that this recent decline is largely tied to a rapid increase in interest rates, and that your income should remain unaffected regardless of any fluctuations up or down in your asset values.
I always stress this point in times like these because while half of our job as financial advisors is managing the numbers, the other half is helping you feel confident and comfortable with your plan. With that said, if you still have concerns after reading this analysis, I encourage you to reach out. We’re always happy to talk through what you’re seeing and help you determine whether any adjustments are warranted.
In the meantime, enjoy the start of spring, and rest assured that if anything significant changes between now and early May, I will share my insights with you right away!
Sources:
1 https://www.marketwatch.com/investing/
2 https://www.cnbc.com/2026/03/30/stock-market-today-live-updates.html
April Recipe: Cheesy Asparagus Tart
Ingredients:
- 1 ½ pounds asparagus, trimmed of woody stems
- 1 tablespoon olive oil
- ½ lemon, zested and juiced
- Salt, to taste
- Black pepper, to taste
- 1 sheet frozen puff pastry (half of a 17.3-ounce package), thawed
- 2 ½ cups dill-rubbed fontina cheese*, shredded (divided)
*Can’t find dill-rubbed fontina? Add ¼ teaspoon of chopped fresh dill to the shredded fontina cheese and stir to combine.
Directions:
- Preheat oven to 400 degrees and line a baking sheet with parchment paper. Set aside.
- In a large skillet, bring 1 inch of water to a boil. Add the asparagus and cook, covered, until crisp-tender, about 5 minutes. Drain and pat dry. Set aside.
- In a small bowl, whisk together the oil, lemon juice and zest, salt, and pepper. Set aside.
- On a lightly floured surface, roll the puff pastry sheet into a 16-by-12-inch rectangle. Transfer to the prepared baking sheet and bake until golden brown, about 10 minutes.
- Sprinkle 2 cups of shredded fontina evenly over the puff pastry, leaving a ½-inch border with no cheese around the edges. Arrange the asparagus over the cheese in a single layer, then drizzle with the oil mixture.
- Bake until cheese is melted, about 10 minutes. Allow to cool slightly, then sprinkle the remaining ½ cup of shredded fontina over the top. Slice and serve warm.
The Cheesy Asparagus Tart recipe: Cheesy Asparagus Tart - Farm Flavor Recipe