Equities: What's Getting Hit and Why

Equities: What's Getting Hit and Why

Back to overview | Related: 2026-03-02-check-other-funds/timeline, 2026-03-02-check-other-funds/oil-and-hormuz

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The Numbers (as of March 2 pre-market)

| Index | Move | Notes | |-------|------|-------| | S&P 500 futures | -1.7% (-91 pts) | Below 100-day moving average | | Nasdaq 100 futures | -2.0% (-442 pts) | Down 3.4% for the month, 2.5% YTD | | Dow futures | -600+ pts | Led by industrial/cyclical weakness | | Nikkei 225 | -1.37% (was -2.66%) | Bargain hunters stepped in | | Hang Seng | -2.5% | Near 26,000 | | Shanghai | -0.13% | Relatively flat — China buffered |

Who Gets Hurt

Cyclicals — the direct casualties:

• Consumer discretionary — higher gas prices = less spending
• Airlines — canceled Middle East flights, fuel costs spiking
• Industrials — supply chain disruption via Hormuz (see 2026-03-02-check-other-funds/oil-and-hormuz)
• Shipping/logistics — Hapag-Lloyd and others halting Gulf transits

Tech/AI — indirect pressure:

• Nasdaq already weak: down 3.4% for the month before this
• Not directly exposed to oil, but risk-off selling hits everything
• AI narrative was already under pressure from valuation concerns
• Capital rotating out of growth into safety (see 2026-03-02-check-other-funds/gold-and-safe-havens)

Emerging markets:

• Asian shares down 1.6% broadly
• Oil-importing countries hit hardest: India, Turkey, South Korea
• EM currencies weakening, which raises import costs further
• Risk of a feedback loop: weak currency → more expensive oil → weaker economy →

weaker currency

Who Might Benefit

Interest-rate-sensitive sectors (if bonds rally):

• REITs could benefit if Treasury yields drop (short-term)
• Utilities — defensive, yield-focused investors rotate in
• But this reverses if inflation takes hold (see 2026-03-02-check-other-funds/fed-and-rates)

Note: Defense and energy stocks are rallying hard, but Palace Fund does not invest in securities that fund war. We track them only to understand where capital is flowing out of other sectors.

The Goldman Framework

Goldman Sachs strategist Dominic Wilson laid out the key question:

How long does the energy shock last?

• Contained (days to weeks): Short-lived dip. Buy the dip in quality names.

Historical precedent: most geopolitical shocks recover within 1-3 months.

• Prolonged (weeks to months): Sustained bear pressure. Oil at $100+ triggers

margin compression across the economy. Earnings revisions come down. This is where it becomes a fundamental repricing, not just sentiment.

Asia's Unique Vulnerability

Asia is the most exposed region:

• China, India, Japan, South Korea account for 69% of crude through Hormuz
• If Hormuz stays closed, these countries face a bidding war for alternative supply
• Nikkei was down 2.66% before bargain hunting — the initial reaction tells the truth
• Korean KOSPI and Taiwan TAIEX under pressure from both oil costs and currency weakness

What to Watch

1. S&P 500 below 100-day MA — if it stays below, technical selling accelerates
2. Nasdaq monthly performance — already worst month since March 2025
3. Earnings revisions — companies will start guiding down if oil stays elevated
4. EM equity fund flows — if money keeps leaving, the selloff deepens
5. VIX — fear gauge. Sustained above 25 = markets expect continued volatility