The current market environment is characterized by heightened volatility and high valuations, with technology and related sectors now comprising approximately 48% of the S&P 500. While the market has seen three consecutive years of double-digit percentage increases, a fourth year is historically rare, and analysts have been anticipating a potential decline of up to 20%. Although a recessionary scenario remains low, some economists have raised the odds to 30%. Market technicals have recently waffled without clear direction, notably breaking an important support level at 6,800 on the S&P 500.

A significant portion of recent market pressure stems from the conflict with Iran and its impact on global energy supplies. While the war itself is estimated to have caused a 3% to 5% hit to the market, concerns regarding the navigability of the Strait of Hormuz—which controls 20% of global oil supply—have caused more anxiety than expected. Crude oil prices briefly spiked near $120 per barrel before retreating to approximately $85. The Federal Reserve is expected to remain on hold until at least May, as these spiking oil prices are viewed as inflationary, potentially preventing the interest rate cuts needed to allow the cyclical side of the economy to breathe.

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