⏳ Reading Time: 2 minutesIn the latest monthly update, our Chief Investment Officer, Richard Flax, explores how markets are navigating geopolitical tensions amid strong earnings forecasts and energy pressures. You can also find a written version of his commentary below.
It’s been a really interesting few weeks in financial markets. The conflict in the Middle East seems to have de-escalated, but the Strait of Hormuz isn’t really open and the oil price is still sitting close to $100 per barrel. At the same time, we’ve seen a pretty solid rebound in equities so far in April and that’s generally helped portfolios.
So, how should we think about this? There are a few points to make. The de-escalation is obviously positive, even if negotiations continue to drag on. But the oil price remains well above where it was at the end of February and that is hitting households and businesses. We’ve already seen higher inflation readings in the US and Europe on the back of higher energy prices. We think that we’ll see higher prices elsewhere the longer those higher energy costs persist. At the same time, the latest macro data hasn’t been particularly weak – retail sales in the US, for instance, held up pretty well in March, suggesting that overall US consumers haven’t yet reined in their spending.
