Global equities sharply reversed direction in March, declining almost 5%, erasing all year-to-date gains, and leaving the quarter down 1.3% (MSCI World All-country index in EUR). Geopolitics drove an energy shock as escalation of the war in the Middle East between USA and Iran disrupted trade flows through the Strait of Hormuz, triggering extreme oil and gas volatility. With the crude oil prices spiking and the European gas benchmark TTF surging, Energy stocks were seriously boosted. However, as risk appetite subsided, all other sectors sold off for most of March – and the month marked the weakest performance for global equities in more than three and a half years. Major U.S. indexes declined for five consecutive weeks; the prominent NASDAQ and Dow Jones Industrial moved into correction territory (more than 10% drop since last peak), and the broad S&P500 narrowly escaped it. The VIX index (a measure of market volatility) jumped to 30 and remained this elevated throughout the month – reflecting uncertainty around future growth and inflation. The macroeconomic data coming out of the largest economy in the world showed some weaknesses too: February payrolls surprised with a net job loss; Q4 GDP was revised down; and consumer sentiment in America fell – adding to concerns about later-2026 momentum. Emerging markets were the weakest-performing region in March, deleting the gains recorded in January and February. Oil importing countries faced significant pressure, with many markets posting losses of 10% or more. As more than 98% of its energy is imported, South Korea is particularly sensitive to increases in oil prices – its equity market registered a single-day record decline of 12.2% on March 4 (but remained up nearly 24% for the quarter). China reported stronger-than-expected PMI growth in March, but equities were dragged down by the country’s dependence on Middle Eastern oil imports. The elevated geopolitical tensions rattled the European markets too. The sharp increase in gas prices to levels last seen when Russia invaded Ukraine in 2022, generated concerns about Europe’s growth prospects – and European equities dropped roughly by a tenth across the continent. Overall, Energy and Utilities outperformed globally, while Materials and Industrials lagged. Traditional safe-haven assets did not hold: precious metals fell precipitously in March, with gold trading more than 15% below its January high, even as prices and geopolitical risks continued to rise. The sharp fall in gold prices was particularly detrimental to South African equities, which declined more than 20%. Many central banks across the globe had their meetings in March, and chose to hold rates steady. The U.S. Federal reserve (Fed) kept policy unchanged and signaled caution; several major central banks (Canada, Japan, England, Sweden, Switzerland) also remained on hold, while investors’ expectations for rate cuts faded away in the face of potentially higher inflation. Even as bonds experienced a sell-off because of these investor concerns about rising interest rates and energy supply, bonds provided stability in balanced portfolios by cushioning the equities March slump. Steady interest income and tight credit spreads helped bonds outperform stocks for the month. Government bond markets were volatile, with the short-term end hit hardest as rate hike expectations replaced anticipated cuts. Japanese Govies fell sharply, especially longer-dated issues, amid fiscal policy uncertainty and very possible Bank of Japan rate hikes. Emerging market debt declined due to strengthening US dollar, while US Treasuries remained comparatively resilient, with global market uncertainty significantly heightened due to the geopolitical tensions between USA and Iran.
US equities reached correction territory in March (more than 10% decline) and were among the weakest-performing major markets for the quarter. The S&P500 index dropped 4.3% for the first three months of 2026, sinking for five-consecutive weeks – a rare occurrence in the past 75 years. Multiple factors contributed to this downturn, including heightened inflation concerns, increasingly hawkish rhetoric from the Fed, and intensified scrutiny over how artificial intelligence–related capital expenditures would be monetized. While overall economic growth appeared to be slowing, underlying activity remained positive, even as elevated energy prices persisted. Despite a slight decrease in job openings and consumer sentiment souring, most retail sales continued to show resilience, dampening the broader economic impact. The market's trajectory shifted dramatically in the last day of February as geopolitical tensions escalated. US and Israeli strikes on Iran disrupted oil flows through the critical Strait of Hormuz, triggering a sharp rise in oil prices and substantial uncertainty within global financial markets. Throughout March, investor sentiment fluctuated between optimism for a resolution and fears of prolonged conflict, further amplifying volatility. Energy stocks emerged as the quarter's standout performers, with integrated producers, refiners, and energy infrastructure companies all benefiting from higher oil prices. Basic materials companies—such as miners, chemical producers, and commodity processors—also fared well, capitalizing on the supply disruptions caused by the Iran conflict and rising commodity prices. Technology stocks, however, faced considerable challenges. The software sector suffered a particularly steep decline, driven by growing concerns that generative AI could undermine the software-as-a-service (SaaS) subscription model. This evolving AI narrative created a dichotomy within the tech sector: investors rotated toward businesses providing AI infrastructure, such as semiconductors, cloud computing, and data center providers, while moving away from traditional software stocks – US software stocks lost a quarter of their value in the first two months of the year. In the early stages of the Middle East conflict, tech stocks demonstrated relative resilience compared to the broader US market, as investors favored higher-quality companies during heightened economic uncertainty. Nonetheless, even Technology stocks buckled and ended March down 3.8%. US Treasuries remained steady throughout the quarter, benefitting from the country's status as a net energy exporter and a cooling labor market, which helped mitigate inflation risks. The Fed kept interest rates unchanged at 3.5%-3.75% and signaled only one rate cut for the year, with Kevin Warsh nominated as the new Federal Reserve Chair. The US Supreme Court ruled against the Trump administration's tariff policy, prompting the administration to consider temporary global tariffs. With signs of labor market weakness and concerns over AI-driven business disruption, investors began to anticipate future rate cuts. However, the increased volatility in March due to the war in the Middle East and rising energy prices, drove government bond yields higher on market speculation about possible future interest rate hikes.
The enormous rise of oil prices in March triggered a steep monthly drop in European shares and deleted all of their earlier outperformance for the quarter – the pan-European index Stoxx600 lost 8% of its value (in EUR) in the month. The quickly escalating Middle East hostilities and the subsequent closure of shipping through the Strait of Hormuz drove Brent crude oil price to its largest monthly increase on record! Inflation in the Eurozone accelerated to 2.5% (from 1.9% in February), solidly above the European Central Bank’s 2% target. Economic activity slowed, as suggested by the PMI – the manufacturing component remained below 50 (indicating contraction), while services shrank for a fifth consecutive month. The Iranian conflict prompted downward revisions to economic growth forecasts for Germany, France, the Netherlands, and Italy. The United Kingdom, however, experienced the largest reduction in growth expectations among major European markets as inflation pressures intensified due to higher energy costs. The weaker growth outlook is expected to constrain the Bank of England’s ability to tighten monetary policy and may lead to a pause in rate increases. When much of the European shares droped in March, due to the conflict in the Middle East, Energy stocks were boosted. Yet, oпe of the steepest declines came in the economically sensitive Consumer discretionary sector - it was hurt the worst during the month. Information technology saw mixed results as software faced pressure from AI disruption, while hardware and semiconductors performed fine, after some well-received corporate earnings. On the fixed income markets, UK Gilts declined by 2.0% during the quarter, underperforming other sovereign bonds due to rising inflation risks from the energy shock and the Bank of England’s hawkish stance, despite earlier expectations of rate cuts. The European government bond market also fell, dropping 0.6% as a whole, as the ECB held rates steady but signaled possible hikes and forecasted persistent inflation, partly driven by the region’s reliance on energy imports. In contrast, European corporate bonds underperformed US peers in both investment grade and high yield segments.
In March, the increased trading on the Bulgarian Stock Exchange (BSE) continued – compared to a year earlier, the turnover doubled both in terms of number of transactions and nominal volume of transactions. The downward trend of the previous month was maintained and deepened in March - the representative index SOFIX lost 6.4%, and the "junior" BeamX – almost 10%.  On 17 March, “HR Capital” AD rang the bell on the BSE after the successful placement the first convertible bond issue on the Beam market. This is now the 6th bond issue realized on the beam market successfully. During the month, the second strategy meeting under the beamUp Lab program (6th edition) was also held. Hosted by the Bulgarian Development Bank, the main focus of the meeting was private equity financing opportunities to support start-ups, small and medium-sized companies. As customary, selected companies made a demonstration presentation to investors (investor pitch). And so, among the blue chips on the domestic stock exchange, the best performer in March was Holding Varna AD (+1.6%), and the worst – the technology company Sirma Group Holding AD (-18.4%).
Source: Bloomberg, BSE