Market Wobbles & Improbable Futures

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The S&P 500 (a collection of 500 rather important companies, and thus, by extension, a significant portion of reality as we know it – though not the bits with the dolphins) currently finds itself approximately 5% below its recent, rather optimistic, peak. This, naturally, has caused a degree of consternation amongst those whose primary occupation involves watching numbers go up. Several factors, each more baffling than the last, appear to be contributing to this minor gravitational shift.

  • President Trump’s tariffs (a sort of economic game of ‘chicken’ played with international trade, and frequently resulting in everyone feeling slightly ruffled) have coincided with a distinctly sluggish pace of economic growth and job creation.
  • Oil prices have, with a disconcerting lack of subtlety, decided to climb to levels not seen for nearly four years. This is, of course, because everything is fundamentally about physics, and oil, it turns out, is quite keen on being expensive.
  • Midterm election years, as anyone who’s ever attempted to predict the future will tell you, are inherently unstable. (The universe, it seems, enjoys a good paradox.)
  • The stock market, in general, is looking a little…optimistic. (A polite way of saying ‘expensive’.)

History, that relentless compiler of data, suggests that this downward drift might continue. Investors, being sensible creatures (mostly), should be aware. Let us delve, shall we, into the exquisitely improbable details.

Tariffs & The Illusion of Economic Control

President Trump, in a bold attempt to reshape the global trade landscape (a landscape, it’s worth noting, that has been shifting for millennia, largely ignoring human intervention), has imposed tariffs on a rather extensive list of goods. He proclaimed in January that the U.S. was “quickly building the greatest economy in the history of the world.” A statement that, while admirably enthusiastic, appears to be… statistically challenged.

U.S. GDP increased by a modest 2.1% last year. Excluding the brief, universally unsettling interlude of 2020, that’s the slowest growth since 2016. Similarly, job creation clocked in at a rather uninspired 181,000. Again, excluding 2020, that’s the slowest labor market growth since 2009. Neither figure suggests a booming economy, unless one redefines ‘booming’ to mean ‘mildly expanding at a rate slightly above existential dread.’

The Rising Tide of Petroleum & The Strait of Hormuz

The U.S.-Iran situation has, with a predictable lack of imagination, impacted the Strait of Hormuz, a vital waterway carrying approximately 20% of the world’s oil and gas. Ship transits have dwindled from a respectable 150 per day to a mere handful. (One suspects the ships are staging a silent protest.)

Brent crude oil prices have soared over 40% since late February, reaching $103 per barrel – a level not seen since August 2022. This translates to higher prices at the pump. The average gallon of regular gasoline recently breached the $3.50 mark. (A small price to pay for the continued functioning of modern civilization, one might argue, though one’s wallet may disagree.)

Midterm Elections: A Predictable Period of Chaos

Historically, the S&P 500 has experienced a median peak-to-trough decline of 19% during midterm election years. That is to say, there’s a roughly 50-50 chance the index will tumble by at least 19% at some point in 2026. This isn’t a commentary on political skill, but rather a reflection of the inherent uncertainty that accompanies any attempt to predict human behavior on a large scale. (It’s a bit like trying to herd cats, only with trillions of dollars at stake.)

The governing party almost always loses seats in Congress during midterms, raising questions about the future of existing policies. Investors, understandably nervous, often withdraw funds until the dust settles. (A perfectly rational response to a fundamentally irrational situation.) This volatility is likely to be amplified by the polarizing nature of Trump’s policies. As Morgan Stanley notes, affordability is a key issue, and supply chain pressures and energy prices are top of mind.

Valuation & The Illusion of Growth

The S&P 500 currently sports a forward price-to-earnings (P/E) ratio of 20.9, a premium to the 10-year average of 18.9. (This means investors are paying a bit more for each dollar of earnings, which is fine, as long as those earnings materialize.) This valuation assumes accelerating earnings growth in 2026. (A bold assumption, given the aforementioned headwinds.)

Economic growth is the cornerstone of corporate earnings. Tariffs and rising oil prices could slow that growth, leading to lower-than-expected earnings. A downward revision to earnings forecasts could easily sink the S&P 500, given its current valuation. The market is in a precarious position. A crash isn’t inevitable, but the odds of a significant drawdown are elevated. Investors should tread carefully. Focus on high-conviction stocks with strong long-term earnings potential, and only if those stocks are reasonably priced. (A strategy that, while sensible, may require an uncomfortable amount of patience.)

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2026-03-16 11:12