Research
In a world that feels increasingly complex, WTW is proud to share “From A to Z: Investment Themes shaping markets today”, a smart, concise guide that breaks down the topics that investors are navigating, how WTW thinks about them, and WTW’s current house view.
Read here.
Market update
Kevin Warsh was nominated as the next Federal Reserve Chair and is expected to succeed Jerome Powell in May. Warsh has been a critic of the Fed’s quantitative easing policies, and he is largely seen as a steady hand by financial markets.
In late February, the US Supreme Court ruled 6-3 to invalidate the Trump administration's use of the 1977 International Emergency Economic Powers Act (IEEPA), which it used to enact country-level tariffs last year. The Trump administration has turned to other tools at its disposal to implement tariffs without requiring congressional approval, such as section 122 of the Trade Act of 1974 – this allows the President to impose up to a 15% tariff rate for 150 days on countries with which the U.S. has a trade deficit.
Markets are reacting to developments in the Middle East.
- The United States and Israel have launched airstrikes across Iran, targeting multiple sites, including oil depots and other strategic infrastructure
- Iran has continued missile and drone strikes targeting US and allied assets across the region
- Iran has named Ayatollah Mojtaba Khamenei as successor to his father, Ayatollah Ali Khamenei
- The conflict remains ongoing, with continued military activity and heightened geopolitical tensions across the region
- The Strait of Hormuz remains at a standstill, with only Iran-linked vessels able to make the crucial crossing. Gulf states have begun to cut oil production
More in the Curious section below.
Something encouraging: positive Q4 earnings news
With nearly all of the S&P 500 companies having reported, Q4 2025 earnings are shaping up strongly. Earnings are expected to grow by around 13.5% year-on-year, supported by revenue growth of approximately 9%, with both tracking ahead of consensus expectations set at the start of the year.
Importantly, earnings momentum has broadened beyond US mega-cap technology, even as these companies continue to exhibit exceptional earnings growth. The median S&P 500 company and US small caps are reporting close to 10% y/y earnings growth over the quarter. This strength reflects sustained US economic growth and a weaker US dollar, which has boosted international revenues (~40% of S&P 500 sales are generated overseas). Margins at the index level have improved and proved resilient for the median stock, as corporate commentary emphasized cost discipline.
US earnings growth remains broad based, but mega-cap tech maintain growth exceptionalism
Source: WTW, FactSet
Date: December 31, 2025
Earnings breadth is a good leading indicator of earnings growth
Source: WTW, FactSet
Date: February 19, 2026
Looking ahead, the macro backdrop remains broadly supportive of US earnings in 2026. AI-led investment should continue to underpin capex trends, while a steadier labor market, resilient household balance sheets, and ongoing fiscal support are likely to sustain consumer demand. Key themes to watch in upcoming earnings seasons include margin durability, AI capex and monetization, consumer resilience, and the evolving fiscal and monetary policy outlook.
Something cautionary: Slowing US Growth
In the US, Q4 GDP was revised down to 0.7% quarter over quarter in its second estimate (from 1.4%), with downward revisions across categories, but notably softer services. Durable goods orders fell -1.4% month-on-month in December versus a -0.8% consensus, while orders excluding transportation rose 0.9% ahead of 0.3% consensus. Headline PCE inflation rose to 2.9%, and core PCE inflation rose to 3.0% year-on-year, both in line with consensus. The preliminary S&P PMI reading was below consensus for manufacturing (51.2 vs 52.8) but above consensus for services (52.3 vs 52.0), both still signaling economic expansion.
Furthermore, jobs in the US materially undershot expectations, with non-farm payrolls at -92,000 in February compared to the +60,000 consensus. Unemployment also increased to 4.4% versus 4.3%, keeping the Fed cautious.
US Labor Market
Source: WTW, FactSet
Date: 12/31/2025
Something curious: Developments in the Middle East
What has happened in markets (as of ~March 13, 2026)
- Crude oil saw sharp swings, with Brent touching $120/bbl before falling to $83.5 in a single session on Monday, March 9 – one of the largest absolute daily ranges in recent years. Coordinated strategic reserve releases, including a sizeable US SPR drawdown, briefly eased concerns, but skepticism remained around their near-term effectiveness. Reports of attacks on vessels in the Strait of Hormuz and damage to regional energy infrastructure reignited supply fears. Brent ended March 13 at around $103, near the top end of recent ranges.
- Equity markets experienced sharp intra-day moves, largely tracking developments in oil prices. Developed market equities finished the week of March 9 down around 1.4%. Defensive sectors outperformed consumer-facing and cyclical areas, while energy was the standout gainer. Financials faced additional pressure from private-credit concerns, amid reports of loan markdowns and rising redemption requests
- Government bond yields rose notably as higher energy prices lifted inflation risk premia and pushed back rate-cut expectations. OIS pricing swung materially: Fed end-year pricing has moved from two full cuts to just half a cut; the ECB from one hike to two full hikes; and the BoE from one cut to nearly one hike, despite the soft January GDP print
- The US dollar strengthened, with the DXY hitting its year-to-date high, supported by safe-haven demand and repriced rate expectations. The Japanese yen weakened, reflecting Japan's energy-import dependence and deteriorating trade-balance implications, with USD/JPY testing levels that previously triggered intervention concerns. Gold slipped over the week of March 9, pressured by higher real yields and a stronger dollar
What does it mean?
We continue to monitor events and are not currently recommending portfolio changes. Below are our key scenarios to frame potential market outcomes:
- Scenario 1 – Contained retaliation (base case): Tensions stabilize after an initial period of retaliation and volatility. Oil prices retrace as fears of sustained supply disruption fade, and markets treat the conflict as a temporary geopolitical risk event rather than a structural economic shock. The broader macroeconomic impact is limited, though the episode reinforces the longer-term shift toward a more fragmented and geopolitically uncertain global environment
- Scenario 2 – Material disruption to the Strait of Hormuz (a material and growing risk): A more sustained disruption to oil flows through the Strait of Hormuz or surrounding energy infrastructure. Oil prices remain elevated for an extended period, in the US$90–110 range or higher, placing sustained upward pressure on global inflation. Higher energy costs weigh on household incomes and corporate margins, delaying Central Bank rate cuts
- Scenario 3 – Further escalation (less likely): A lower probability but more severe outcome would involve broader regional escalation affecting key trade routes or energy infrastructure. In this case, oil prices move well above current levels and trigger a sustained economic impact and stronger risk-off move across markets
Precious metals, particularly gold, have been on a record-breaking ascent, heightened by geopolitical risks, the debasement trade, concerns about the Federal Reserve’s independence, and a weakening dollar.
Source: WTW, FactSet
Data as of March 11, 2026
WTW news
Thank you for taking the time to read this edition of What To Watch, brought to you by Jon Pliner, global chief investment officer; Jim Neill, senior director; Nikki Latta, senior associate; Garrett Goniea, senior associate; Madison Rugh, analyst and the WTW Investments team.
Disclaimer
The information included in this email is intended for general educational purposes only and should not be relied upon without further review with your WTW consultant. The information included in this email is not based on the particular investment situation or requirements of any specific trust, plan, fiduciary, plan participant or beneficiary, endowment, or any other fund; any examples or illustrations used in this email are hypothetical. As such, this email should not be relied upon for investment or other financial decisions, and no such decisions should be taken on the basis of its contents without seeking specific advice. WTW does not intend for anything in this email to constitute “investment advice” within the meaning of 29 C.F.R. § 2510.3-21 to any employee benefit plan subject to the Employee Retirement Income Security Act and/or section 4975 of the Internal Revenue Code.
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