Market Volatility 2026: What’s Driving the Selloff and How Income Investors Are Responding

I’ve been through three crypto bear markets and now I’m watching the Nasdaq do the exact same thing equities did in late 2021. The charts look familiar. The panic in the financial media looks familiar. And the advice I’m seeing get shared most widely online looks exactly as dangerous as it did back then. So let me interrupt the narrative with some actual data.

As of March 28, 2026, the Nasdaq is headed for its largest weekly loss since the April 2025 tariff selloff. The S&P 500 fell to its lowest intraweek levels since September 2025. Non-farm payrolls dropped 92,000 in February, the third monthly job loss in five months. Unemployment hit 4.4%. Goldman Sachs raised its recession probability to 30% over the next 12 months. These are not small data points being noise-corrected. These are the kind of numbers that change the conversation.

And on top of that, courts just ruled parts of the tariff program unlawful, creating $130B or more in potential refund exposure. New 15% global tariff proposals are still sitting there. The Fed went from pricing in 2.4 rate cuts at the end of February to actively discussing the possibility of a rate hike within a single week. That’s not a subtle shift in expectations.

Here’s what I want to cover: what’s actually driving this, why some income investments are holding up better than the Nasdaq, how covered calls are performing in this environment, what recovery signals I’m actually watching, and what I’m not doing with my portfolio right now.

What’s actually driving the selloff

This is not a single-cause drop. If you’re reading headlines that say “tariffs caused the selloff” or “Iran caused the selloff,” you’re getting half the picture. The real story is two independent volatility drivers converging at the same time.

The first driver is trade policy. The tariff program that launched in early 2026 was designed to reshape global trade flows. Courts ruling parts of it unlawful introduced a new layer of uncertainty on top of the existing tariff rates. Goldman Sachs put a 30% recession probability on that. Not because tariffs always cause recessions, but because the uncertainty they create makes businesses hesitate on hiring, capital expenditure, and expansion. When CFOs don’t know what their input costs look like six months from now, they pull back. That pullback shows up in the jobs data. That is exactly what is happening.

The second driver is energy. Brent crude is sitting around $108 per barrel; WTI is around $93. This is a direct result of the Iran conflict that began in early March 2026. The Strait of Hormuz is partially blocked. Not fully closed, but disrupted enough that insurance costs for ships passing through have spiked and some shippers are avoiding the route entirely. Oil traded above $80 on the initial spike and has stayed well above $100 since. That is a supply shock on top of whatever tariff uncertainty was already priced in.

The combination is not additive in a simple way. High oil means stagflation risk on top of tariff uncertainty. The Fed cannot cleanly cut rates into oil-driven inflation. And it cannot cleanly hike rates into weakening employment data. That policy trap is part of why the market is repricing rate cut expectations so aggressively.

If you want to understand the energy angle in more depth, I broke down the Hormuz situation and what oil price scenarios mean for portfolios in my article on the oil crisis parallels. That piece covers the 1970s historical parallel and why energy sector positioning matters right now.

The income investor surprise: SCHD is winning while QQQ is bleeding

Here’s a number that should be getting more attention than it is. The Schwab U.S. Dividend Equity ETF (SCHD) is up 12% year-to-date as of late March 2026. The Nasdaq-100 (QQQ) is negative for the same period. Let that sink in.

That is not a small outperformance. That is a complete inversion of the growth-bets-everything playbook that has dominated since 2009. And it makes sense when you look at the underlying data: dividend and value stocks are winning because they are less exposed to tariff uncertainty, less exposed to the Iran energy shock, and because their cash flow profiles look more stable in a stagflation scenario.

As an income investor running YieldMax ETFs and holding Bitcoin, this is validating. Not because I picked dividend stocks over growth. I didn’t. My crypto and covered-call strategy is taking a different path to the same destination. But the principle holding is the same: cash flow matters when capital gains are uncertain.

The practical takeaway here is not “sell everything and buy SCHD.” The takeaway is that the assumption baked into the 2021-2025 market, that growth always wins over income in the long run, is not a law of nature. It is a bet on low rates and stable economic conditions. Both of those assumptions are being stress-tested right now.

If you’re rebalancing, this is the environment where you want to look at your actual goals, not just the total return numbers. My portfolio risk framework article walks through how I think about allocating across income, growth, and crypto assets based on actual market conditions rather than narrative.

High VIX means your covered calls are performing better than you think

Let me go specific here, because I am actually living this with my own positions. The CBOE Volatility Index (VIX) has been elevated throughout March 2026. When VIX is high, option premiums are high. When option premiums are high, covered calls distribute more. That is the math of YieldMax ETFs and covered call strategies in a volatile market.

My YieldMax positions have been generating higher option premium income in the past six weeks than they did in the prior quarter. That does not show up as a higher share price. It shows up as higher monthly distributions. For an income investor, that is the point.

The Nasdaq is down. My growth-heavy accounts are down. But the income accounts are writing checks. That is the covered call thesis in a volatile market: you do not need the underlying to go up to get paid. You need the market to move enough that option sellers demand a premium for taking on that risk. Right now the market is moving.

If you are holding growth positions and feeling the pain of the selloff, now is a reasonable time to look at whether some of those shares could be turned into call options sold against them. Not selling everything. Not going to cash. But taking some of the premium income from the volatility and using it to reduce your cost basis. My covered calls vs. buy-and-hold breakdown goes into the specifics of when this trade makes sense and when it does not.

Recovery triggers I’m watching

I’m not calling a bottom. I have no idea where the bottom is and anyone who tells you they do is either selling you something or has forgotten what 2022 felt like. What I am doing is watching specific catalysts that could change the directional picture.

The first is the Iran ceasefire scenario. Trump extended the ceasefire deadline by 10 days on March 28. Talks are described as “going well” but Iran is not confirming direct negotiations. If a ceasefire is reached and Hormuz shipping normalizes, oil drops 20 to 30% immediately. That removes one of the two volatility drivers. That would be a meaningful positive for risk assets broadly.

The second is the tariff court ruling. The case is live. If courts strike down more of the tariff program, the uncertainty premium in business investment gets priced out. That could restore some hiring and capex confidence faster than a rate cut would.

The third is any signaling from the Fed that reflects awareness of the employment deterioration. The market is currently pricing rate hike risk because the Fed is not acknowledging the weakening jobs picture. If that changes, the repricing of rate expectations reverses.

The fourth is CPI on April 11. If oil-driven inflation starts to moderate without a hard economic landing, the Fed’s path becomes clearer. If it does not, you have stagflation and the playbook gets more complicated for everything, crypto included.

What I’m not doing

I want to be specific here because the “raise cash and wait for clarity” trade is being pushed hard right now and I think it is mostly wrong for most people most of the time.

I’m not timing the bottom. I have no edge in short-term market timing. I have been through enough of these to know that the people who call the bottom are right sometimes and wrong more often than they admit. The cost of being wrong on timing is giving up your position at the worst possible moment and then waiting for a confirmation that never comes cleanly enough to act on.

I’m not panic selling. My portfolio is built for volatility. The crypto portion is long-term. The YieldMax portion is generating income regardless of short-term price movements. Selling either of those into a panic would be converting a paper loss into a real loss and giving up the income stream that is actually performing right now.

I’m not going to all-cash. All-cash means you are making a decision to wait for certainty that the market will not give you cleanly. And then you face the timing problem on the way back in. I have seen too many people sell at the bottom and then wait for a pullback that never comes before getting back in.

What I am doing is reviewing whether my allocation percentages still match my goals. That’s a once-a-year exercise at minimum, and a volatile market is a good time to do it. If you want to see how I structure that review, my position sizing guide covers the framework.

FAQ

Is the stock market in a recession right now?
Not officially. Two consecutive quarters of negative GDP growth is the common definition and we have not hit that threshold as of late March 2026. But the non-farm payroll data is showing deterioration and Goldman Sachs has raised its 12-month recession probability to 30%. The conversation is shifting from “soft landing” to “what kind of slowdown” and that shift is moving markets.

Should I sell my growth ETFs and move to dividend funds?
It depends on your time horizon and goals. If you are within five years of needing the money, a shift toward more income-focused positions makes sense. If you have a longer horizon, growth versus income is a bet on interest rates and economic conditions, and both can be right at different times. The mistake is moving based on narrative rather than your actual plan.

Are covered calls still worth it if the market is volatile?
Yes, actually more so. High VIX means high option premiums. Selling covered calls in a volatile market generates more income per contract than in a calm market. The risk is that your shares get called away if the market bounces sharply, which means you miss some upside. For income-focused investors who do not want to actively trade, that is usually an acceptable tradeoff.

What does this mean for Bitcoin?
Crypto has not decoupled from macro risk assets the way some people predicted. Bitcoin is down alongside equities in this selloff. The stagflation risk and Fed uncertainty are headwinds for risk assets broadly. That said, Bitcoin’s long-term narrative around hedge status gets tested in real-time during drawdowns like this. The honest answer is that it has not proven to be the hedge yet that people were buying it for.

Is it safe to buy the dip?
Buying the dip works until it does not. The difference between a dip and a crash is not visible in advance. Dollar-cost averaging reduces the timing risk of a lump-sum dip buy. If you have conviction on a position and the fundamentals have not changed, buying in tranches is more defensible than trying to call the exact bottom. My DCA article covers the framework in more detail.

What about the crypto fear and greed index right now?
The fear and greed index has been in “Extreme Fear” territory for most of March 2026. Historically, extreme fear readings have been better times to add risk assets than to sell them. But the index tells you what sentiment is, not what catalysts are coming. Combine it with the fundamental data points above before making a move.