War’s impact, learning from earnings

By Kyle Tetting

The war in Iran continues to be the dominant headline driving markets, and March’s returns reflect the pressure. The S&P 500 declined nearly 5% during the month, including dividends. Crushed by higher gas prices and the potential for prolonged uncertainty, consumer sentiment fell drastically, a telling sign of distress in the key component of the American economic engine.

Just a month ago, I wrote about the potential consequences of this war, and, increasingly, we are seeing the fallout. Though we haven’t learned much new in the past month, that should begin to shift in the coming weeks.

Corporate reports

First-quarter earnings season kicks off in earnest starting in mid-April. Consumer sentiment, while important, hasn’t been the best predictor of consumer behavior in recent years. Earnings season, though, will give us firsthand reporting of how businesses have been impacted by the war and rising input costs.

We’ve already seen executives like United Airlines CEO Scott Kirby talk about lasting effects for air travel and likely higher ticket costs, but earnings season puts the leaders of some of the country’s biggest businesses front and center. These updates will be especially relevant as 2026 was shaping up to be a very strong year for earnings.

Earnings forecasts

Forecasts for first-quarter earnings growth have quickly jumped from 8% to 9% year-over-year, to closer to 14% according to Refinitiv, with similar trends coming from other forecasters. They projected growth to accelerate quickly into the second half of the year, with full-year estimates pushing to nearly 19% for all of 2026.

For the first time in a few years, forward price-to-earnings multiples for the S&P 500 had fallen back below 20 times future earnings, a direct result of strong forecast growth and the declining price. That’s not necessarily cheap, but we have started to see some great businesses become considerably more attractive from a price perspective.

Inflection point

For much of the past couple of years, market growth was built on reasonable expectations for strong earnings growth. But the next few weeks are likely to be a major inflection point for investor expectations.

Some clarity on the war or optimism in earnings reports could help alleviate near-term concerns. On the other hand, further escalation or pessimism from the C-suites of major corporations could weigh on earnings outlooks and investor sentiment broadly.

Beyond the headlines

The range of headlines is causing whiplash, which is why the right approach for investors is headline agnostic. We’ll wait for shifts in fundamentals and respond accordingly. Even then, it’s going to be easy to point to a handful of bullet points one way or the other and feel pressured to take action.

The simple advice prevails: Construct your portfolio toward your long-term objectives, building in considerable conservatism where possible to help bridge near-term uncertainties that distract from your objectives.

Interest rates

Despite some recent interest rate spikes on fears of inflation, bonds remain close to flat on the year. Prices, which move inversely to yield, have declined modestly, but investors need to remember that with broad bond benchmarks like the Bloomberg US Aggregate Bond Index yielding more than 4%, they’re finally getting paid to own bonds. Those interest payments provide a nice steady tail wind that helps to stabilize balanced portfolios even when the underlying bond prices are working against us.

Investors face a challenging environment. March statements will reveal a shift from the many recent quarters of investment growth. However, it’s important to remember that we’ve prepared our portfolios as best we can for volatility.  Ultimately, we’re not investing for this month or this quarter but for the opportunities that continue to emerge down the road.

Kyle Tetting is president of Landaas & Company, LLC.