# Equities: What's Getting Hit and Why

Back to [[2026-03-02-check-other-funds|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