Markets Treading Water While Bigger Questions Build

SAS Financial Advisors LLC | Mar 2, 2026

The economy continues to muddle along and so does the S&P 500.

Since October the S&P 500 has been flat. Year to date the index has gained 1.08 percent. The Nasdaq has also been flat since October 2025 and is negative year to date. After repeated record highs in 2025 equity markets are consolidating.

As we have discussed in prior newsletters including Markets Are Moving Faster Than the News and 2026 Market Outlook, index performance rarely tells the full story.

Mid and small cap indexes are higher this year. Value indexes are higher. International indexes are higher. Diversification works overtime because we cannot know in advance where positive returns will occur.

Inflation remains a concern as does GDP growth despite the strong fourth quarter 2025 reading. Growth and semiconductors have weakened as the Artificial Intelligence trade cools. Nvidia released strong earnings this week and declined more than 5 percent following the release. Expectations remain elevated.

Thirty-year mortgage rates fell below 6 percent for the first time since 2022 as longer term rates declined. With the recent Producer Price Index coming in above expectations interest rates dipped again with 10-year Treasury yields falling below 4 percent. Lower rates should help mortgage activity again. The same data contributed to the decline in equities at the end of the week.

From Strong GDP to Ghost GDP

A term gaining traction in early 2026 is Ghost GDP following a widely circulated report titled The 2028 Global Intelligence Crisis by Citrini Research.

The concept describes a scenario not a prediction where GDP growth remains strong on paper while the economic benefit does not reach the broader public.

The theory centers on Agentic AI. As artificial intelligence becomes capable of performing the work of thousands of employees at a fraction of the cost the traditional link between productivity and consumer spending may weaken.

Real GDP reflects rising corporate profits and national output as AI increases efficiency.

Ghost GDP reflects the possibility that if wages decline while corporate margins expand wealth remains concentrated in capital ownership rather than circulating through the broader economy. Machines do not consume goods and services.

Citrini Research modeled a potential feedback loop that unsettled markets earlier this year.

Companies replace white collar labor with AI to expand margins
Displaced workers reduce discretionary spending
Headline GDP remains elevated while money velocity slows
Additional cost cutting through automation follows

This discussion connects directly with themes outlined in AI, Markets, and Concentration Risk. Innovation creates opportunity but also creates transition risk.

Geopolitics and Tariffs

Geopolitical awareness remains important, but its market impact is unpredictable. Questions remain regarding Iran and regional stability. Any direct conflict would be significant with potential ripple effects across energy and global markets.

Domestically the Supreme Court ruled against the legality of the administration’s use of tariffs. Democrats are calling for tariff refunds while the administration is seeking alternative methods to maintain elements of the tariff structure which would require Congressional approval. At this time there are no indications the administration intends to defy the ruling.

Inflation data may influence future policy decisions. Credibility and consistency continue to influence both markets and confidence.

The Bigger Picture

We are in an environment where major indexes are flat while underlying sectors rotate. Interest rates are easing while inflation remains persistent. Artificial Intelligence remains both an economic driver and an open question.

As emphasized in Trust and Financial Planning in Uncertain Times, disciplined diversification and long-term allocation decisions matter more than short term narratives.

Economic data can appear strong while households feel pressure. Markets can advance while sentiment declines. GDP can expand while distribution becomes uneven.

Diversification remains practical. Policy shifts remain unpredictable. Patience remains important.

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