WEEKLY BRIEF | War Tests the Market—Diversification Holds

Hello, and welcome to the IVA Weekly Brief for Wednesday, March 18.

There are no changes recommended for any of our Portfolios.

It’s been 12 trading days since the U.S. and Israel attacked Iran. The Strait of Hormuz—through which roughly 20% of the world’s oil and fertilizer flows—is effectively closed. The geopolitical stakes are high, and the path forward is uncertain. But traders have had time to react.

Here’s what may surprise you: The market’s reaction has been relatively subdued.

Across Vanguard’s lineup, most asset classes are down. Stocks—large and small, U.S. and international—are in the red. Bonds, too. Real estate hasn’t been spared.

But 500 Index (VFIAX) is down just 2.3% this month. Even the worst-performing fund—Global ex-U.S. Real Estate Index (VGRLX)—is off 8.4%.

That’s not nothing—but it’s far from panic.

Where are investors finding shelter? No surprises: Energy stocks and commodity funds are up as oil prices spike. Cash and ultra-short Treasurys are holding steady. Market Neutral is quietly in the black. And mega-cap U.S. tech stocks are acting as a relative port in the storm.

With so many funds in the red—and stocks and bonds down at the same time—it’s tempting to say diversification has failed. But that’s not what the data shows.

Bonds are down, but less than stocks. Total Bond Market Index (VBTLX) has fallen 1.4% versus a 2.3% drop for 500 Index. A gain would be better, but bonds are still providing ballast.

And at the portfolio level, diversification is doing exactly what it’s supposed to do.

Consider Vanguard’s LifeStrategy funds in March:

• LifeStrategy Growth (VASGX)—80% stocks—down 3.6%
• LifeStrategy Moderate Growth (VSMGX)—60% stocks—down 3.1%
• LifeStrategy Conservative Growth (VSCGX)—40% stocks—down 2.5%
• LifeStrategy Income (VASIX)—20% stocks—down 2.0%

The more conservative the portfolio, the smaller the drawdown.

And remember—we’re talking about just 12 trading days. Short-term moves can be noisy, but they don’t invalidate long-term relationships or sound investment principles.

If anything, this is diversification working as intended—not eliminating losses, but helping limit them.

Misfire

Vanguard’s emails misfired… again.

As I told you (here and here), on December 31, 2025, Vanguard sent an “outdated tax planning email” welcoming us to 2021. It wasn’t just the date that was wrong; the entire email appeared to be recycled, complete with old branding.

This latest slip-up isn’t quite as egregious—but it still caused unnecessary confusion.

Here’s what happened. In mid-January, Vanguard emailed investors about their 2026 required minimum distributions (RMDs). All fine.

The problem? Vanguard sent the same email again on March 12.

This duplicate email sowed enough confusion—and raised enough questions—that Vanguard followed up with a correction… eight hours later.

For the record, I did not get these emails. I am still more than a few years away from taking RMDs. But multiple IVA readers shared them with me, suggesting this wasn’t an isolated glitch—it reached plenty of retirees.

Look, mistakes happen. But this is becoming a pattern. And after a similar blunder less than three months ago, you’d expect a bit more care.

Vanguard has acknowledged that its technology and service haven’t kept pace with its growth. They’ve said improvements are underway.

Fair enough. But at some point, those improvements need to show up where investors actually experience the firm—like in the emails landing in their inbox.

Our Portfolios

Our Portfolios are hanging on to positive returns for the year through Tuesday. The Aggressive Portfolio is up 0.8%, the Aggressive ETF and Growth Portfolios are up 0.4%, the Moderate Portfolio is up 2.0% and the Conservative Portfolio is up 1.2%.

This compares to a 1.4% decline for Total Stock Market Index (VTSAX), a 4.2% gain for Total International Stock Index (VTIAX), and a 0.4% return for Total Bond Market Index (VBTLX). Vanguard’s most aggressive multi-index fund, Target Retirement 2070 (VSNVX), is up 0.8% for the year, and its most conservative, LifeStrategy Income (VASIX), is up 0.4%.

IVA Research

Yesterday, shared a closer look at Market Neutral and Commodity Strategy—and why neither builds wealth the way stocks do—with Premium Members.

Until my next IVA Weekly Brief, have a safe, sound and prosperous investment future.