Weekly Market Recap – Week Ending March 27, 2026
U.S. equity markets experienced broad-based weakness this week, with growth-oriented and technology-heavy segments leading the decline, as reflected in notable pullbacks across major ETFs such as QQQM, XLK, and XLC. Despite this overall softness, pockets of strength emerged in energy and materials, where rising commodity prices and continued geopolitical sensitivities supported gains in XLE and XLB. The divergence in sector performance highlights an ongoing rotation beneath the surface, as investors selectively reposition toward inflation-sensitive and resource-linked assets while trimming exposure to high-multiple growth sectors. Meanwhile, individual stock performance continues to reinforce this trend, with energy-linked names delivering strong short-term gains, underscoring the market’s current preference for tangible asset exposure over broader index participation.
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In the below tables we use major ETF’s as a proxy for some major indexes as well as each of the sector groups into which we divide the overall markets. Tracking these over time provides a more defined picture of the US markets than simply tracking major indexes. This is followed by notable individual stock movers over the past month, and finally our full strategy outlook.
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Strategy Note:
We could summarize our strategic outlook for the upcoming week as “Read last week’s strategy update. Rinse and repeat.”
With governmental chaos still the order of the day and inflation concerns showing no sign of abating, this is a very tough environment for funds needing to be close to 100% long in stocks. But here are alternatives within the general equity ETF category without taking on private equity or commodities-linked equity risk.
Individual investors who have most of their assets in broad-based equity funds or indexed ETFs might consider diverting new fund flows into some of the buffered ETFs offered by Innovator Capital, First Trust (FT Vest), iShares, Pacer Financial, True Shares and others. These funds, sometimes called defined outcome ETFs, are popular with risk-averse investors. They offer capped upside and cushioned downside. Investors should be aware of two major considerations. The first is that the fees are relatively high, generally about 1% (100 basis points). The second is that the promised “cap” on losses only applies if you buy an ETF in the month specified in the fund’s name and hold that fund for a 12-month period.
One interesting example of such a fund is Innovator Equity Defined Protection ETF – 1 Yr April (ZAPR). For an expense ratio of 0.79%, ZAPR provides exposure to U.S. large-cap stocks with a 100% buffer against any net losses over a precise 12-month period with an upside cap on potential gains. We use ZAPR as an example since April starts this coming Wednesday. So if buying in April, that would be the family member to consider for potential investment. Some investors might be wary of the assets under management level, currently about $35 million. However, we believe there is a good chance, since the month to invest in it is coming up, that this level could double or increase further.
Other buffered ETFs allow for more upside but cap the downside at somewhere between 8% to 10%, with the buffer percentage defining the percentage loss one is willing to accept for a period ending in the same month one year later. Examples of those that would correspond with an April purchases would be FAPR from FT Vest, BAPR from Innovator Capital, and APRT from Allianz Investment Management. The broader defined-outcome category has grown to over 400 funds, with assets exceeding $70 billion This makes it one of the fastest-growing ETF segments. The vast majority of these funds use S&P 500 ETFs (like SPY) as their reference asset, with many providers launching monthly “series” that create hundreds of distinct ticker/date combinations.
We already covered sector shifting away from inflation-challenged industry and sector groups, such as Building Materials, Transportation, Consumer Discretionary, Retail, Restaurants, Hospitality, Manufacturing and Consumer Durables. We move on to the sectors that thrive during inflation, which include Oil; Energy; Materials and Mining. Last week, we described these sectors as being among the most overvalued. Since in most cases, stocks in these sectors declined less in last week’s market rout than stocks in most other sectors (other than utilities), these sectors are even more overvalued this week on a relative basis.
Stocks in the most vulnerable sectors that we might look to consider selling include a number of names that fall into the “fallen angels” category that may have trouble withstanding a substantial downturn and a credit-tightening environment. These stocks include: Ethan Allen Furniture (ETD); Champion Homes (SKY); Cracker Barrel (CBRL); and BeazerHomes (BZH). All are rated 2 (Sell) by our predictive ranking and are between 10% and 25% overvalued according to our valuation model. There are two formerly successful companies in these sectors whose stocks are rated 1 (Strong Sell) and that are also more than 10% overvalued. These stocks are Xerox Corp. (XRX) and Dave and Busters (PLAY).
Since all of these stocks have already suffered major declines and could rebound more than 100% off low bases in a rising tide, it would be very dangerous to short them. Remember that a high-volatility market swings in both directions. That said, however, current shareholders in these six companies may want to consider cutting their losses by selling now.
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