Last week's macroeconomic agenda was shaped by the sharp tension between growth and inflation. US and Israeli attacks on the Iranian mullah regime and the de facto blockade of the Strait of Hormuz rapidly pushed oil prices higher. Brent crude finished the week above $85, while investors worry that the energy shock will reignite inflation. The market's "soft landing" narrative suddenly turned into fear of "stagflation" with the negative employment data released on Friday. Adding to this geopolitical tension, the US Supreme Court's decision in recent weeks to overturn $175 billion in tariffs imposed during the Trump era created another shockwave in the markets. Immediately following the decision, the Trump administration's imposition of new global tariffs of 10% to 15% further deepened uncertainty. The S&P 500 index initially rose 0.6% following this news, but experienced sharp sell-offs as the new tariffs became clearer. Risk appetite is caught between liquidity concerns and policy uncertainty.

The optimism that began the week, centered around AI spending and strong corporate balance sheets, gave way to questions about the duration of the conflict and the Fed's potential response by the end of the week. Supply chain vulnerabilities and rising energy costs are putting heavy pressure on small and medium-sized enterprises (IWMs), in particular. Institutional investors are trying to price in whether geopolitical risks will create a temporary or structural wave of inflation. Non-farm payrolls data came in at -92,000, largely missing the expectation of +50,000. This figure marks the first negative employment data in years, while the unemployment rate rose to 4.4 percent. The combination of rising energy costs and collapsing employment data severely restricts the Fed's room for maneuver. Richmond Fed President Tom Barkin issued a clear warning that rising fuel prices could disengage consumer spending.

On the other hand, the US Services PMI data exceeding expectations proved that resilience persists in some parts of the economy. On the Producer Price Index side, core inflation is showing signs of solidifying at 3.6% year-on-year, while headline inflation is at 2.9%. Markets have rapidly withdrawn their expectations for interest rate cuts in 2026 due to the increasing risk of stagflation. According to the Kalshi forecast market, the probability of zero interest rate cuts in 2026 has climbed to 22%. A similar hawkish trend is evident in Europe. Bundesbank President Joachim Nagel deepened the sell-off in the bond market by emphasizing that inflation is a greater concern than growth. Even the possibility of an 18 basis point interest rate hike by the end of the year is beginning to be priced in by the European Central Bank. For the Fed to return to an interest rate reduction cycle, the war needs to end quickly and oil prices need to fall rapidly.

The outlook for the main indices has become quite volatile, with increasing volatility. The SPY ETF, which tracks the S&P 500 index, finished the week down 1.98% at $672.38, a pullback of approximately 3.6% from its all-time high of 697.84 reached on January 28th. The index closed just below its 50 and 100-day moving averages, signaling a critical technical weakness. The Nasdaq 100 index outperformed the S&P 500 and Russell 2000 thanks to partial resistance in technology stocks. QQQ experienced a limited 1.20% drop, closing the week at $599.75, boosted by Broadcom's earnings report. However, technical indicators continue to show weakness in momentum, and a break below support levels could risk the Nasdaq index following the S&P 500.

The hardest hit index was the Russell 2000, which comprises small-cap companies. IWM ended the week down 4.04% at $250.89. Rising interest rates, energy shocks, and stagflation fears created significant selling pressure on this group of companies. The fact that the VIX volatility index is holding above 29 confirms that the risk-aversion sentiment in the market remains strong.

In the context of sectoral rotation, investors are seeking refuge in defensive and balance-sheet-strong technology stocks in the face of increasing risks. Software and large technology companies have outperformed the market by demonstrating earnings resilience against high oil prices. The IGV Software ETF reached its highest ever dollar volume, while giants like Microsoft and Salesforce were strong performers in the technology sector last week. A significant upward momentum is also observed in defense industry stocks amidst the geopolitical crisis. The Supreme Court's annulment of tariffs generated considerable excitement in the retail and discretionary consumer sectors. Large importing companies like Target, Walmart, and Costco were among the clearest winners, anticipating reduced input costs. However, this rise in these companies was somewhat offset by the possibility of the refund process taking months. In the agricultural sector, John Deere and ADM continue to be under pressure due to the risk of retaliatory tariffs.

The weakest link in the market was small-cap companies and alternative asset managers. Liquidity problems in private loan funds for giants like BlackRock had a chilling effect on their financials. The simultaneous rise in oil and the dollar index is significantly worsening the short-term outlook for emerging markets and energy-intensive industrial companies. A clear divergence of opinion exists in the market between optimism about a "short-term war" and pessimism about "structural inflation." Ed Yardeni, taking a stance close to market consensus, predicts the war will last weeks, not months. Yardeni's base scenario is that the S&P 500 index will reach 7700 points by the end of the year after a correction of around 10-15% (I share a similar view). Goldman Sachs analysts Jessica Rindels and Pierfrancesco Mei calculate that every $10 sustained increase in oil prices will slow US growth by 0.1% and push inflation up by 28 basis points.

Fundstrat technical strategist Mark Newton, however, suggests that after the pressure on indices until mid-month, a new rally towards the 7150 level will begin. On the global trade front, the Supreme Court's decision to overturn tariffs is being interpreted differently by various institutions. Analysts believe hardware manufacturers like Apple and Nvidia will benefit from this cancellation by increasing their margins. However, Tony Paquariello of Goldman Sachs emphasizes that the real catalyst in the technology sector will be the speed at which capital expenditures (capex) translate into revenue growth, rather than macroeconomic developments. For emerging markets, the sharp 12% drop in Korean stocks is attributed more to tight portfolio positioning than to economic fundamentals.

This week, the markets' primary focus will be on the upcoming Consumer Price Index and Personal Consumption Expenditures data. Markets will pay particular attention to the rate of price increases in services and energy. A headline inflation figure higher than expected could lead the Fed to completely abandon its interest rate reduction cycle. A surprise decline, however, could create the perception that the "stagflation" scenario is just an early fear, leading to strong buying in technology stocks. On the central bank front, the meetings of the European Central Bank and the Bank of England on March 19th are of great importance. In particular, ECB President Lagarde's statements and new economic projections will be critical in understanding the cost of the war in the Middle East to the European economy. A dovish, growth-oriented tone from Europe would be considered a surprise, as current members see inflation as the main threat. On the US side, demand levels at Treasury auctions will also be closely watched to determine the direction of bond yields.

Throughout the week, macroeconomic dynamics such as retail sales data and jobless claims will also be monitored. A sharp increase in jobless claims could prove that the negative non-farm payrolls data is not a one-off anomaly. Strong consumer data will ease recession fears. Weak consumer data, on the other hand, will further suppress risk appetite in the market, accelerating the shift towards safe-haven assets like the dollar and gold.

This week, the financial results of technology and software giants are poised to determine market direction. In particular, figures from Oracle and Adobe will serve as a test of resilience for the software rally. The impact of corporate AI spending on income statements is among the most anticipated topics. The payback periods for investment expenditures will be scrutinized in the balance sheets of software and semiconductor companies. Any slowdown in order books due to regulatory risks or supply chain disruptions could lead to sharp sell-offs in high-multiplier companies. In this context, the key company details that investors will focus on are quite clear. During this reporting period, markets will price in forward-looking guidance messages from company management rather than the numbers themselves.

The current market regime is characterized by high uncertainty and sudden volatility spikes. In this environment of tightening liquidity and rapid unwinding of crowded positions, investors are expected to be extremely sensitive to macroeconomic data flows. The balance between risk and opportunity is entirely shaped by geopolitical developments and the actions of policymakers. The main catalysts that will determine the direction of the market revolve around these two axes.

Risks of the Week:
Prolonged Conflict Scenario: If the Strait of Hormuz remains closed for an extended period, oil prices could rise to $110, potentially causing inflation to spiral out of control.

Liquidity Crisis in the Private Credit Market: A chain reaction of withdrawals by giants like BlackRock could lead to a lock-up in credit markets.

Budget Deficit and Bond Yields: $175 billion in tariff refunds increasing US Treasury borrowing could push bond yields higher, impacting valuations.

Fed Inaction: The Fed, caught between high inflation and rising unemployment, halting interest rate cuts (stagflation) could create a dramatic contraction in multiples.

Retaliatory Tariffs: Newly introduced global tariffs escalating into a trade war could erode the profits of agricultural and industrial companies.

Opportunities of the Week:
Software Sector Resilience: Technology companies like Microsoft are poised to become safe havens by providing margin protection against high energy prices.
Defense Sector: Increased military budgets by governments amid geopolitical crises are creating stable demand for defense stocks.
Uranium Theme: With energy security taking center stage, uranium companies offer structural upside potential in anticipation of nuclear demand.
Precious Metals: As geopolitical chaos continues, gold continues to hold upside potential as portfolio insurance.

In light of all this data and macroeconomic context, individual investors urgently need to abandon emotional reflexes in approaching the markets. We are facing a market where not only economic cycles but also geopolitical fault lines and legal regulations are priced in instantly. The possibility of stagflation forces investors to be more selective and flexible. We are in a period where trend-based, technical support and fundamental margin dynamics are paramount. The first action plan should be to implement a "barbell" strategy. One end of the portfolio could consist of large technology companies and energy infrastructure firms with strong balance sheets and high pricing power. The other end should be positioned in precious metals like gold, which provide protection against inflation and policy uncertainty. This strategy would limit losses with precious metals if the crisis deepens, while achieving growth with Nasdaq-weighted technology stocks when the market recovers.

A second course of action is to reduce the overall beta of the portfolio and stay away from small-cap companies that are vulnerable to macroeconomic headwinds. The Russell 2000 (IWM) index appears likely to remain trapped in a cycle of weak employment and high interest rates. Retail giants and defense companies may offer opportunities during pullbacks. In this rapidly changing environment, it is essential to adhere strictly to stop-loss levels and adopt an investment philosophy that keeps risks at the center.

The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.