Key Highlights
Market Movers & Shakers
  • U.S. equity markets retreated last week as surging energy prices and a surprising labor market contraction drove the S&P 500 to its worst weekly performance since October.
  • WTI crude surged toward $120/barrel over the weekend as escalating Middle East tensions and the closure of the Strait of Hormuz pushed U.S. gas prices up 20% in just one week.
Updates & News
  • In portfolio news, we recap strong fiscal second-quarter results from Costco and Intuit, highlighted by Costco’s commitment to pass potential tariff refunds to members and Intuit’s new AI-driven partnership with Anthropic.
  • The pace of Tandem’s transition in manager-traded accounts remains consistent with our mid-February update; new funds are nearly 50% of the way in-line with our strategies after one month of management.

Market Movers & Shakers

Major U.S. equity indices pulled back last week, extending the recent loss of momentum as a historic spike in energy prices collided with a surprise contraction in the labor market. The S&P 500 fell 2.02%, posting its worst weekly performance since October. The Nasdaq Composite was the relative outperformer, sliding 1.24%, while the small-cap Russell 2000 bore the brunt of selling, posting a 4.07% decline for its worst week since April 2025. Domestic indices significantly outperformed their international counterparts last week. Energy woes hit Europe and Asia hard, spurring a nearly 7% drop in the MSCI EAFE index and an 8% slide for the Emerging Markets index. Within the S&P 500, Energy (+0.97%) was the only sector that finished the week in positive territory. Materials (-7.15%), Consumer Staples (-4.91%), and Healthcare (-4.64%) were last week’s biggest laggards. Despite the tough tape, the S&P 500 is still within 3-4% of all-time highs.



Source: Creative Planning, Charlie Bilello

The escalating situation in the Middle East took center stage last week. The United States and Israel launched joint airstrikes against Iran over the weekend, killing Iran’s Supreme Leader, Ali Khamenei. Iran struck multiple U.S. bases and embassies in the region, as well as regional oil infrastructure. Global energy markets faced a major disruption as the Strait of Hormuz, the world’s most critical oil chokepoint, was effectively closed. The closure of the Strait halts the transit of 20 million barrels per day, a volume representing approximately 20% of the world’s total oil consumption. West Texas Intermediate crude oil surged 36%, the biggest weekly jump on record (dating back to 1983). The price of oil nearly topped $120 a barrel over the weekend, the highest level since the summer after Russia invaded Ukraine in 2022. According to data from AAA, the average price of U.S. gasoline recently surpassed $3.50 a gallon, up nearly 20% in a week. Fears of rising inflation fueled by higher energy prices led to a jump in U.S. Treasury yields. Investors reduced bets on multiple Fed rate cuts this year, with pricing now suggesting a single rate cut through year-end. The yield on the 2-Year Treasury note rose 17 basis points while the yield on the 10-Year Treasury note climbed nearly 20 basis points for the week.



Sources: U.S. Bureau of Labor Statistics via FRED, Gabriel Cortes / CNBC (chart)

In macroeconomic news, Friday’s nonfarm payrolls report showed the U.S. economy unexpectedly lost 92,000 jobs in February and the unemployment rate increased to 4.4%. Estimates were for a gain of 50,000 to 60,000 jobs and for the unemployment rate to remain steady at 4.3%. The change in total nonfarm payrolls for December was revised down by 65,000, from +48,000 to -17,000, and the change for January was revised down by 4,000, from +130,000 to +126,000. With these revisions, employment in December and January combined was 69,000 lower than previously reported. February’s report marks the third time in five months that the economy lost jobs. Part of the drop in employment last month resulted from a winter storm that weighed on construction and leisure and hospitality payrolls, as well as a strike by healthcare workers that sidelined more than 30,000 workers in Hawaii and California. A broader measure of unemployment, the U-6 unemployment rate, which includes discouraged workers and those holding part-time positions for economic reasons ticked lower to 7.9% from 8.1% in January. The U-6 unemployment rate has steadily ticked lower over the past few months from 8.7% last November. Countering the weak jobs data, wages rose more than expected. Average hourly earnings increased 0.4% for the month and 3.8% from a year ago, both slightly exceeding expectations.



Sources: Bloomberg, Macrobond, Apollo Chief Economist Torsten Slok

Equity volatility, as measured by the VIX, surged last week. The VIX crossed above 30 for the first time since the April 2025 tariff-related selloff that took the market down nearly 20%. Near-term uncertainty pushed the VIX curve into backwardation, where the front-month VIX futures trade at a higher price than longer-term futures (protection today is more expensive than protection months from now). However, despite the recent geopolitically driven surge, there is a fascinating shift that has been building under the surface in the volatility complex. While the VIX tracks market-level volatility, single-stock volatility is trading at a historically wide premium compared to the index. The chart above, from Apollo, visualizes the high-dispersion environment we find ourselves in today. Mechanically, the chart reflects a breakdown in correlation. When stocks move in lockstep (high correlation), index volatility rises to meet single-stock levels. When they move independently (low correlation), index volatility stays low, appearing calm, even while individual stock prices remain incredibly volatile. Rather than hedging against a general market downturn, investors are paying a massive premium for idiosyncratic protection – signaling that market participants believe there will be significant performance gaps between AI winners and losers.

Updates & News*

In portfolio news, Costco released its fiscal second-quarter 2026 results last week, delivering a beat on both earnings and revenue. Costco showed strong year-over-year growth across all primary metrics: revenues increased 9.2%, earnings per share increased 13.9%, and global same store sales were up 7.4%. One of the standout figures was the 22.6% rise in digital sales, driven by improved app engagement and the expansion of “Costco Next”, a curated third-party marketplace. Costco’s CEO, Ron Vachris, made headlines by pledging that any potential refunds from recently invalidated government tariffs would be passed directly to members through lower prices. The earnings report highlights the company’s continued ability to drive traffic and maintain membership loyalty despite a volatile economic environment.

Elsewhere, but sticking with the earnings theme, Intuit reported its second-quarter fiscal 2026 results at the end of February. Intuit, which owns Quickbooks, TurboTax, CreditKarma, ProConnect, and Mailchimp, reported results that surpassed analyst expectations on both the top and bottom lines. Revenues increased 17% year-over-year, while earnings per share increased 25% from the previous year. Management reiterated its full-year fiscal 2026 guidance, projecting revenue growth of 12-13%. Intuit’s CEO, Sasan Goodarzi, highlighted that over 3 million customers have engaged with Intuit’s AI agents, with a repeat engagement rate of over 85%. The company also announced a new partnership with Anthropic to further integrate artificial intelligence into its suite of products.

On the transition front, new manager-traded accounts and accounts with recent deposits that have been under Tandem’s management for two weeks are approximately one-third of the way invested in our strategies. By the one-month mark, new money is nearly half of the way in line with our strategies, and by the three-month mark new accounts and deposits are ~80% of the way transitioned.

Source: Source of all data is FactSet, unless otherwise noted.

*The transition level activity taken by Tandem is applicable to new manager-traded accounts and new money in manager-traded accounts, not the composite or firm-wide level. New manager-traded accounts and new money in manager-traded accounts are not automatically invested on the first day. Rather, they are transitioned into our strategy over a longer time period that is dependent upon market conditions, this process differs from Tandem’s model-provided strategies, where money is invested on the day the account opens. Strategy level activity is applicable to the composite and action is taken at the firm-wide level.

Print
Back to Archives

Disclaimer: Tandem Investment Advisors, Inc. is an SEC registered investment advisor.

This audio/writing is for informational purposes only and shall not constitute or be considered financial, tax or investment advice, or an offer to sell, or a solicitation of an offer to buy any product, service, or security. Tandem Investment Advisors, Inc. does not represent that the securities, products, or services discussed in this writing are suitable for any particular investor. Indices are unmanaged and not available for direct investment. Please consult your financial advisor before making any investment decisions. Past performance is no guarantee of future results. All past portfolio purchases and sales are available upon request.

All performance figures, data points, charts and graphs contained in this report are derived from publicly available sources believed to be reliable. Tandem makes no representation as to the accuracy of these numbers, nor should they be construed as any representation of past or future performance.

This document was originally written/recorded in English. Tandem does not guarantee the accuracy, completeness, or reliability of any translated materials, and shall not be held responsible for any discrepancies, errors, or misinterpretations arising from the translation process.