CWS Market Review – March 3, 2026

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This weekend, the U.S. military commenced Operation Epic Fury with its mission of toppling the theocratic regime in Iran.

I’m far from an expert on defense issues or geopolitics (although I am a retired PFC), so I have no valuable insights on the efficacy of the mission or its potential outcome.

Around here, our concern is with finance and how the markets are reacting. For now, markets are clearly nervous. On Monday, the U.S. stock market opened lower. At one point, the S&P 500 was down 1.2% on the day. As you’d expect, many defense and aerospace stocks held up well along with energy stocks. Several travel-related stocks were among the losers.

Let me caution you that I see absolutely no reason for investors to sell. If anything, a downturn could present us with a good buying opportunity.

Bear in mind that a lot of successful investing boils down to doing nothing when everybody else is panicking. As the great Jesse Livermore said, “It never was my thinking that made the big money for me. It always was my sitting. Got that?”

Got it.

Despite the market’s weak morning on Monday, the index finished slightly positive by the closing bell. I’m sure a lot of people didn’t see that coming, and it’s a good reminder that the market loves to do what’s not expected.

Today we saw similar action but with even greater swings. At one point this morning, the S&P 500 was down over 2.1% and it briefly reached a three-month low. Like on Monday, the market reversed course and eventually closed lower by 0.9%.

Also today, there was a clear “run for safety.” By that, I mean that much of the losses were concentrated among High Beta stocks while the Low Volatility sector held up far better (still down, mind you, but not as much).

In plain English, the conservative stocks remained calm while the volatile stocks were more…well, volatile.

Check out this chart which shows the S&P 500 Low Volatility Index (in blue) compared with the S&P 500 High Beta index (in red). Since early January, Low Vol has been doing much better. This comes after last year when High Beta thrashed Low Vol.

We can also see this flock-to-safety among size categories. The big guys in the S&P 100 were down just 0.6% today, but the small-cap Russell 2000 was down close to 1.8% today.

Not surprisingly, the price of oil gapped up this week, but it wasn’t a panic move. One-fifth of the world’s oil consumption goes through the Strait of Hormuz. There could be a dramatic price spike, and that would certainly hurt consumer spending.

We saw that happen after Saddam Hussein invaded Kuwait, and that helped tip the economy into a recession. It can take a while before a disruption in the oil market appears as prices at the pump, and the odds of higher prices increase the longer the military operation lasts.

On Monday, we got the ISM manufacturing index report. This is a good report to watch because it usually comes out on the first business day of each month. Monday’s report said that the ISM Manufacturing Index for February was 52.4. That’s down a small bit from January’s number of 52.6. Wall Street had been expecting 51.8.

Any ISM number above 50 means that the factory sector of the economy is growing. This was the second month in a row of expansion, and it comes after 10 months in a row of contraction.

The Federal Reserve doesn’t meet again for another two weeks. It’s very doubtful that the Fed will make any move on interest rates at its upcoming meeting. In fact, it probably won’t make a move in the meeting again after that. The June meeting, however, could see some activity, but those odds have fallen some since the military operation started.

Remember that it’s very likely that Kevin Warsh will take over as the head of the Fed in May. Traders now see a 45% chance that the Fed will cut rates in June. That’s down from 56% a few weeks ago. The consensus on Wall Street is that we’ll have two 0.25% rate cuts before the end of the year.

On Friday, the government will release the jobs report for February. The January report said the economy created 130,000 new jobs that month. This time, economists expect to see a gain of just 50,000 jobs. A weak jobs number could spur the Fed to act, but at this point, it would have to be a dramatic miss. Now let’s look at one of my favorite little-known stocks.

Stock Focus: Allison Transmission

In our premium newsletter, we’ve recently finished all the earnings reports for Q4. (By the way, you can sign up for it here!) There’s one of our stocks in particular that I wanted to share with you, which is Allison Transmission (ALSN). In three-and-a-half months, shares of Allison are up close to 60% for us.

Allison has a market value of about $10 billion. While that may sound like a lot, it’s small potatoes on Wall Street. Only a few analysts cover the stock, which suits me just fine.

On February 23, Allison said it made $1.18 per share. That missed Wall Street’s forecast of $1.46 per share. The good news is that Allison gave reassuring guidance, and the shares rallied 4.4% the day after the report. After that, it closed higher for four straight days until finally closing lower today.

Allison specializes in making vehicle propulsion solutions, primarily fully automatic transmissions and electrified propulsion systems (including hybrid and fully electric options) for medium- and heavy-duty vehicles.

You can find their products in almost any vehicle including buses, motor homes and even the Abrams tank.

I added Allison to our 2025 Buy List, and it was a flop, but we held on and I’m glad we did. Once again, it was our sitting that did the trick.

The big news recently is that Allison completed the acquisition of Dana Incorporated’s Off-Highway Drive & Motion Systems business. This deal helps expands their footprint.

For all of 2025, Allison had sales of $3.01 billion, which matched its forecast. For the year, Allison made $7.33 per share. That’s down from $8.31 per share in 2024.

Let’s look at guidance, which is a little complicated due to the Dana deal. For all of 2026, Allison expects sales between $5.575 billion and $5.925 billion, but sales for the Allison Transmission segment are expected to range between $3.025 billion and $3.175 billion. That’s better than I had expected.

For 2026, Allison expects net income between $600 million and $750 million. That’s compared with $623 million last year. That’s not bad. It works out to net income of roughly $7.25 to $9 per share. If that’s right, then the stock is still going for a decent value. The current Enterprise Value/EBITDA is 11.67.

I also like that Allison increased its quarterly dividend by 7% to 29 cents per share. The new dividend is payable on March 20, to stockholders of record at the close of business on March 9.

In our premium issue, I rate Allison a buy up to $130 per share.

That’s all for now. The next jobs report will be due out this Friday, March 6. I’ll have more for you in the next issue of CWS Market Review.

– Eddy

Posted by on March 3rd, 2026 at 6:32 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.