Hundreds of Stocks Hit 12-Month Lows as Stagflation Rises

Bears Provide Market Fuel as They Fight Potentially Positive News

Ugly market action turned even uglier on Friday as two developments accelerated the selling pressure.

The first was a CBS News report that Pentagon officials had made detailed preparations for deploying U.S. ground forces into Iran, with senior military commanders submitting specific requests as President Trump weighs his options. An additional 2,500 Marines are already deploying to the region along with three more warships.

Trump said, "No, I'm not putting troops anywhere" when asked directly on Thursday about the possibility, then immediately added: "If I were, I certainly wouldn't tell you."

Investors were not reassured by that denial.

The prospect of a ground operation is a significant escalation from the air campaign that investors had been trying to price, and it raises the question of how long and how costly this conflict ultimately becomes.

The second development was a sharp drop in bonds as interest rates jumped on inflation concerns. The iShares 20+ Year Treasury Bond ETF (TLT) fell 2% and is now trading at levels last seen in Summer 2025 during the tariff inflation concerns. Fed funds futures are now pricing in a 25% chance of a rate hike by year end, a scenario that was essentially unthinkable three weeks ago. National average gas prices have risen from $2.93 a gallon on February 20 to $3.91 as of Friday, a $1 increase in three weeks that is showing up directly in consumer budgets and inflation expectations.

The inflation picture here is worth some contemplation. Typically, inflation reflects an overheated economy and the Federal Reserve raises interest rates to slow demand. This inflation is being driven primarily by supply constraints in oil and gas, not by an overheating economy. Raising rates may modestly slow demand for energy, but it does nothing about the supply side of the problem.

What makes this more complicated is that there are signs of economic slowing alongside the inflation pressure. That combination is "stagflation," and it is the most difficult economic environment for the Fed to navigate because there is no straightforward monetary policy response that addresses both problems simultaneously.

Internal Action Deteriorates

About four stocks declined for every one that advanced on Friday, with roughly 360 names hitting new 12-month lows. There was no rotational action to hide in. Every major index cut through support. The Magnificent Seven (MAGS) led the decline with a loss of more than 2.5% and closed well below its 200-day simple moving average. Breadth was poor across the board with no pockets of momentum other than inverse index ETFs.

The S&P 500 is still not close to a technical bear market by the traditional definition of a 20% decline from highs. But the action feels considerably worse than the numbers suggest and the damage to individual stocks in many sectors is already well beyond that threshold. It may look, feel and smell like a bear market, but we will have to call it something else for now.

Opportunity in the Wreckage

The positive spin on this environment is that significant mispricing is developing. Stocks with strong fundamentals and improving charts are being sold alongside genuinely impaired names because ETF and index selling does not discriminate. At some point, those stocks will come back and they will come back sharply. It does not feel that way right now but market cycles are inevitable and the current one will end.

The challenge is staying patient and not trying to time the exact turn. You are better off not even attempting it. When the move comes there will be time to act.

Have a great weekend. I'll see you on Monday.

At the time of publication, DePorre had no positions in any securities mentioned.