U.S. stocks surged on the last trading day of March, but analysts bluntly said, "This rebound is not worth trusting."

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U.S. stocks rebounded strongly on the last trading day of March, but analysts warn that this rally may not be worth chasing.

On Tuesday, boosted by news that the Trump administration may seek to end the U.S.-Iran military conflict, the Dow Jones Industrial Average surged 1,125 points, up 2.49%; the Nasdaq Composite soared 3.83%; and the S&P 500 Index rose 2.91%. Tech stocks and communication services were the main drivers of the rise. However, this rally took place against the backdrop of extreme market volatility—Brent crude futures jumped 63.3% in March alone, marking the largest single-month increase since records began in 1988. International oil prices closed at $118.35 per barrel.

Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions, bluntly said: "I don’t think this rally is truly trustworthy." He also noted that market volatility tends to be amplified at month-end and quarter-end nodes. Kevin Gordon, Head of Macro Research and Strategy at Schwab Research Center, commented: "Today’s market action perfectly illustrates this highly turbulent environment—everything can reverse in an instant."

Signs of Easing in Iran, but Uncertainty Remains

The immediate catalyst for the rally was multiple reports indicating an easing of the U.S.-Iran conflict.

According to Xinhua News Agency, Trump is considering stopping military strikes against Iran, even though the Strait of Hormuz is still under Tehran's control. Meanwhile, Iranian President Pezeshkian said Iran has a "necessary willingness" to end the war, provided the other party meets Iran’s demands, especially giving the necessary assurance of no further aggression.

However, Gordon pointed out that there is still a severe lack of accurate information regarding the degree of damage to Middle Eastern energy infrastructure and there is uncertainty about what kind of security measures will be taken in the future. Melson added that even if Trump manages to find an "exit ramp" for the conflict, there’s no guarantee oil prices will quickly fall: "We are racing against the 'oil price shock clock.'"

Market Anxiety Shifting From Inflation to Growth

The bond market’s movements reveal a subtle shift in investor sentiment.

On Tuesday, the yield on the 10-year U.S. Treasury fell to 4.310%, lower than Friday’s 2026 high of 4.439%. In the nearly $30 trillion Treasury market, funds are moving from "inflation worries" to "growth concerns."

Melson stated: "The market is turning the page, shifting from worrying about inflation to worrying more about economic growth." He pointed out that during the initial four weeks of the conflict, the market was overshadowed by concerns that the Fed might be forced to raise rates because of inflation pressure, but now the real issue is the historic oil price surge’s substantive harm to the economy. He warned that if $4 per gallon gasoline persists, or higher oil prices start eroding corporate profit margins, Wall Street will have to revise its current wait-and-see stance.

Valuations Improve, but Earnings Expectations Not Yet Lowered

Stocks underwent significant adjustments in March. Except for the S&P 500 barely avoiding a technical bear market (a drop of at least 10% from recent highs), three other major indices entered correction territory during the month. Wells Fargo Securities and JP Morgan have recently lowered their year-end target prices for the S&P 500.

According to FactSet Senior Earnings Analyst John Butters, as of last Friday, the S&P 500’s 12-month price-to-earnings ratio had fallen from 22 times last December to 19.9 times, relieving valuation pressure. Meanwhile, driven by improved earnings expectations in the energy sector, overall first-quarter earnings growth expectations rose slightly to 13%, up from 12.8% the previous week.

However, Melson noted that the current improvement in valuations is premised on Wall Street not having substantially lowered earnings expectations yet—similar to the Fed’s wait-and-see attitude. Once the impact of high oil prices on corporate profits becomes apparent, this premise will be tested.

Risk Disclaimer and Exemption ClauseThere are risks in the market and investments need to be made cautiously. This article does not constitute personal investment advice, nor does it take into account the unique investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article fit their specific circumstances. Investing based on this content carries one’s own responsibility. ```