Dr. Craig Callahan ICON Advisers – Founder & Executive Committee Chair
Equities
The S&P 1500 Index hit its high for the year on February 9, 2026, then drifted sideways the remainder of the month. After the stock market closed for the month on Friday, February 27, Israel and the United States attacked Iran. The stock market began to decline, and the S&P 1500 Index finished down -4.98% for the month of March and down -3.82% year-to-date.
The graph shows the S&P 1500 index from March 31, 2025, through April 1, 2026. The sharp drop in early April of 2025 was when the White House announced the maximum tariff threats. Even with the recent drop in March, the index is still up 33.79% off that April 8 low of last year. In fact, it begins in April, right about where it was last October and November. from March 31, 2025, through April 1, 2026. The sharp drop in early April of 2025 was when the White House announced the maximum tariff threats. Even with the recent drop in March, the index is still up 33.79% off that April 8 low of last year. In fact, it begins in April, right about where it was last October and November.
The basis behind the selling in March of this year was the price of oil and, in our opinion, some misguided reasoning. Oil (Brent) went from $72.48 per barrel on February 27 to a high of $118.35 on March 31. Investors worried that the increase in the price of oil would cause higher inflation and that the Federal Reserve (Fed) would no longer be able to resume the monetary easing that began in September 2025. We have stated many times that we view inflation as compounding: price increase, on top of price increase, on top of price increase, etc. It seems to us that the spike in the price of oil has the potential to cause a one-time price increase, but not a compounding of price increases. To jump from a one-time price increase to the belief that the Fed cannot resume easing and therefore sell stocks seems imprudent.
The stock market is a leading indicator. We expect it to hit bottom and rebound before there is complete certainty regarding Iran and the price of oil. It’s too early to know if the low on March 30 will be the bottom, but it did have some behaviors often seen at bottoms, such as the high level of uncertainty.
Bonds
The yield on the 10-year Treasury dropped in February to a low of 3.94% on February 27, 2026. With the increase in the price of oil and the accompanying inflation fears, the yield shot up to a high of 4.43% on March 27. We do not believe this is the beginning of a bigger advance. To the contrary, the yield appears comfortable to us in the 4.0% to 4.2% range.
Summary
Normally, when stock prices fall, the ICON Value/Price (V/P) ratio increases, but that did not happen this time. Our valuation equation includes a discount rate that is based on the 10-year Treasury and corporate bond yields. As those yields increased in March, value dropped about proportionate to the drop in stock prices, so V/P remained about constant. There is still adequate value, and with earnings growing, we would expect the stock market to be higher a year from now.
The data quoted represents past performance, which is no guarantee of future results. Opinions and forecasts regarding sectors, industries, companies, countries and/or themes, and portfolio composition and holdings, are all subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security, industry, or sector.
Investing in securities involves inherent risks, including the risk that you can lose the value of your investment. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. Investments in international securities may entail unique risks, including political, market, regulatory, and currency risks. In general, there is less governmental supervision of foreign stock exchanges and securities brokers and issuers. Investing in fixed-income securities such as bonds involves interest rate risk. When interest rates rise, the value of fixed-income securities generally decreases.
Individual account holdings and composition may vary. Opinions and forecasts regarding sectors, industries, companies, countries and/or themes, and portfolio composition and holdings, are all subject to change at any time, based on market and other conditions, and should not be construed as a recommendation of any specific security, industry, or sector.
ICON’s value-based investing model is an analytical, quantitative approach to investing that employs various factors, including projected earnings growth estimates and bond yields, in an effort to determine whether securities are over- or underpriced relative to ICON’s estimates of their intrinsic value. ICON’s value approach involves forward-looking statements and assumptions based on judgments and projections that are neither predictive nor guarantees of future results. Value readings are contingent on several variables, including, without limitation, earnings, growth estimates, interest rates, and overall market conditions. Although valuation readings serve as guidelines for our investment decisions, we retain the discretion to buy and sell securities that fall beyond these guidelines as needed. Value investing involves risks and uncertainties and does not guarantee better performance or lower costs than other investment methodologies.
ICON’s value-to-price ratio is a ratio of the intrinsic value, as calculated using ICON’s proprietary valuation methodology, of a broad range of domestic and international securities within ICON’s system as compared to the current market price of those securities. According to our methodology, a V/P reading of 1.00 indicates stocks are priced at intrinsic value. We believe stocks with a V/P reading below 1.00 are overvalued, while stocks with a V/P reading above 1.00 are undervalued. For example, we interpret a V/P reading of 1.15 to mean that for every $1.00 of market value, there is $1.15 of intrinsic value which has not yet been realized in the market price.
The unmanaged Standard & Poor’s Composite 1500 (S&P 1500) Index is a broad-based capitalization-weighted index comprising 1,500 stocks of Large-cap, Mid-cap, and Small-cap U.S. companies. Individuals cannot invest directly in an index.
The 10-year yield is the benchmark 10-year yield to maturity reflected by the current issue 10-year U.S. Treasury note.
Sources: Bloomberg
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