Stocks closed lower on Friday and for the week.

Since the U.S./Israel campaign against Iran started (roughly 3 weeks ago), the Dow is down -6.94%; the S&P 500 is down -5.41%; the Nasdaq is down -4.50%; the small-cap Russell 2000 is down -7.37%, and the mid-cap S&P 400 is down -7.80%.

But the indexes were already off their highs prior to that. So, from their all-time high close, the Dow is down -9.19%; the S&P 500 is down -6.77%; the Nasdaq is down -9.65%; the small-cap Russell 2000 is down -10.31%, and the mid-cap S&P 400 is down -8.61%. (4 of the 5 major indexes are in 'pullback' territory, while the Russell is in 'correction' territory.)

I point this out for a couple of reasons.

For one, pullbacks are defined as a decline between -5% and -9.99%, and they happen on average of 3-4 times a year. Corrections are defined as a decline between -10% and -19.99%, and they happen on average of about once a year. (Bear markets are defined as a decline of -20% or more, and they happen on average of about once every 5 years. Although, we've actually had a couple within the last 5 years.)

Anyway, as painful as pullbacks and corrections are, they are very common. Every bull market has them. But if you know these are commonplace moves, you can instead look at them as opportunities to buy rather than places to sell.

The market was due for a pullback/correction. And the Middle East conflict set the stage for that to happen in earnest.

But the second point is, I don't see this turning into anything more than that at this point. That's because there are too many bullish catalysts to support the market right now. That includes a resilient economy, relatively tame inflation (still too high, but the Fed still sees it on a path towards its target rate), expectation for another rate cut this year and next, increased productivity, strong corporate profits with double-digit EPS growth forecast for each of the next four quarters, and, of course, the ongoing AI boom.

So, hang in there. Once the Middle East conflict comes to a close, and oil starts to head lower, the fears of a wider conflict will end along with it, and the market can get back to trading on the fundamentals, which point to not only higher prices, but another double-digit gain.

In the meantime, Middle East headlines will continue to influence the market.

On Saturday, President Trump said, "If Iran doesn't fully open, without threat, the Strait of Hormuz, within 48 hours from this exact point in time, the United States of America will hit and obliterate their various power plants, starting with the biggest one first."

The message was posted on 3/21 at 6:44 PM. Which means on Monday evening, we'll know if Iran has complied.

In response to the President's message, Iran said the Strait remains open to all, except "Iran's enemies." A bit of a conciliatory response. But they followed that up by saying, "If Iran's fuel and energy infrastructure is attacked by the enemy, all energy, information technology, and desalination infrastructure belonging to the United States and the regime in the region will be targeted." The opposite of conciliatory.

This week could ultimately see a de-escalation, and easing of oil prices, if the Strait is indeed 'opened.' Or an escalation if it is not, and the threats are carried out on both sides.

Should be a busy week.

See you tomorrow,