For Real March Madness, Look to Wall Street’s Hell Weeks

Call it “Hell Week,” or “March Madness,” but from now until the end of March, the stock market could face some gut-wrenching price swings.  

On Tuesday, Federal Reserve chair Jerome Powell began delivering his monetary policy to the Senate Banking and House Financial Services committees. This kicked off several events — from employment data to a consumer inflation report — that could influence how high the Fed will raise rates this year. 

Most experts expect the Fed to raise the prime rate by 25 basis points to 5% by the end of March, with similar rate hikes in May and June. 

But if the Fed is more aggressive than that, the stock market will get jumpy. Companies frequently carry debt, and borrowing rates will shrink profitability — and investors get bearish when companies appear to be losing money. 

That said, a dicier market doesn’t mean it’s time to abandon ship. While we’re still at the beginning of the month, let’s look at some ways you can prepare yourself for the toughest weeks in March. 

How investors can prepare for March 

1. Know when the market might get shaky 

The Fed has one goal, which it’ll pursue ruthlessly: to cut inflation from its current rate (6.4%) to a targeted range of 2%. 

» Learn more: Run the numbers with our inflation calculator 

Ultimately, any data or reports in March that indicate a strong economy will go against this target. That could mean a lower unemployment rate or increased retail spending. If the economy hasn’t weakened slightly, the Fed won’t feel they’re in control of inflation. More rate hikes will follow, and the stock market could get wobbly. 

Make no mistake: The stock market will be unsteady no matter what the Fed decides. But its movements may depend on the outcome of five key events: 

• March 7 and 8: Powell already hinted on Tuesday that the Fed would likely raise rates higher than anticipated. Expect stocks to be volatile for the short term. 

• March 10: The U.S. Department of Labor will release its jobs report. Many are expecting 200,000 new jobs in February. Any more than that and the Fed will get apprehensive. A strong job market could mean higher wages, increased consumer spending and higher inflation. That could encourage the Fed to increase rates. 

• March 14: The Bureau of Labor Statistics will report what happened to consumer prices in February. If inflation in February was similar to January (6.4%), the Fed won’t be happy. That means more rate hikes could come. 

• March 15: The Department of Commerce will release data on retail spending. If spending increased last month, the economy would have gotten stronger. Unfortunately, the Fed doesn’t want that. A stronger economy could compel it to raise the fund rate to discourage spending. 

• March 22: The Fed will finally reveal its interest rate decision. Many are expecting an increase of 25 basis points. But depending on the data and reports listed above, the Fed could raise the fund rate by as much as 50 basis points. 

2. Diversify your holdings 

Not all market sectors will be impacted equally in March. 

In fact, some might actually perform better if the Fed becomes more assertive. For example, banks will profit from higher borrowing rates. Credit card processors, like Mastercard and Visa, could perform better, too. A good index fund or exchange-traded fund that tracks the financial sector could help you gain exposure to this market.

» MORE: Best-performing bank stocks

Another sector to follow is consumer discretionary. This includes retailers, travel stocks and entertainment. Retail sales have been strong this year, possibly fueled by higher wages. In fact, consumer discretionary companies in the S&P 500 are performing better than the index itself — a year-to-date gain of 12.13% compared with 5.44% in the S&P 500. 

Even sectors sensitive to higher interest rates might be worth watching. Stocks that investors consider solid long-term picks, like Amazon and Alphabet, could have bad days — or weeks — that give you an attractive entry point. Other large-cap stocks that could be discounted include Tesla, Ford, Apple and Microsoft.

» Learn more about the benefits of buying the dip

3. Keep a long-term perspective   

For long-term investors, it doesn’t matter what happens in March 2023. You may opt to tune out this noise as long as you’ve chosen stocks you’d want when the market is recovering. 

For perspective, the current S&P 500 bear market started on January 3, 2022, and has continued until today — roughly 430 days. That’s longer than the average bull market, a rare occurrence. While past performance is no guarantee of future results, history tells us that bull markets typically last longer than bear markets, and stock market performance during a bull period often makes up for bear market declines and then some. Investors who are willing to keep their long-term strategy in mind and hang tight through periods of market volatility are often happy they did so.