The big things you need to know: First, in tandem with the 5% decline in the S&P 500, investor and consumer sentiment have slipped in recent updates as investors have digested the possibility of a longer conflict in Iran and consumers have started to notice higher gas prices. Second, we review our macro takeaways from RBC’s Financial Institutions conference, where we detected echoes of the lingering confidence and emerging concerns that are seen in the surveys we discuss.
Takeaway #1: Sentiment slips for investors and consumers, as the S&P 500 is on the cusp of true pullback territory
As of Friday’s close, the S&P 500 was down 4.96% from its January peak, on the cusp of what we’d consider to be true pullback territory (5-10%), but close to where the brief period of weakness that emerged last October/November bottomed out at (a drop of 5.1%). As the week wore on, it appeared to us that the prospect of a longer conflict emerged as a more realistic possibility. Before the war started, we viewed the angst in the US equity market as a sentiment unwind, and have been keeping a close eye on various sentiment gauges.
Let’s start with investor sentiment, which fell last week. In contrast to the prior week when optimism rose slightly (reflecting views a few days after the Iran strikes), net bulls eased in last week’s AAII investor survey which was captured midweek. As of 3/12/26 net bulls were at -14.5% on the weekly update (a deterioration vs. the prior week’s -2.4%) and -6.5% on the four-week average (down vs. -2.8% the prior week). The four-week average is currently between average and one standard deviation below the long-term average (but just barely), a level that has, on average, been followed by a gain of 10.8% in the S&P 500 on a 12-month-forward basis. The four-week average is starting to get very close to the -1 standard deviation mark, which would take the model into a range consistent with a +15% 12-month-forward S&P 500 return should it fall below that level but stay above the -2 standard deviation mark. Overall, what we’re seeing at the moment on our AAII model is that sentiment made some important progress toward one potentially oversold threshold, but isn’t there quite yet.
“On the broader sentiment index, even with the recent slippage, for now the index still appears to be stabilizing around the 2022 lows.”
Lori Calvasina, Head of U.S. Equity Strategy, RBC Capital Markets
Meanwhile, for consumers, the University of Michigan reported a small decline in its headline sentiment index in the March 2026 preliminary reading. According to the press release, the survey was conducted February 17 through March 9, with about half completed after the start of the US military conflict in Iran. They noted “interviews completed prior to the military action in Iran showed an improvement in sentiment from last month, but lower readings seen during the nine days thereafter completely erased those initial gains.” The press release also highlighted the impact of gas prices. As we reviewed the data, we noticed that sentiment deteriorated for the highest and middle-income brackets, but improved for the lowest-income bracket, bad news since this cohort may be most at risk from further increases in gas prices. On the broader sentiment index, even with the recent slippage, for now the index still appears to be stabilizing around the 2022 lows.
On the flip side, CEO sentiment has been improving. In a survey that was taken February 23 to March 6 (shortly after the IEEPA tariffs were struck down by SCOTUS, and both before and after the strikes on Iran began), the Business Roundtable reported that its index of CEO Economic Optimism rose for 1Q26 primarily due to improvements in expectations for capex and sales. The improvement in the Business Roundtable survey syncs up with the improvement we’ve seen in other C-suite surveys for 1Q26 from the Conference Board and Chief Executive magazine. While it’s not clear how the war in Iran impacted this survey’s results, it and the other C-suite surveys that are out for 1Q26 do at least tell us that corporate sentiment was in a good place at the start of the conflict.
