Richard Stroud
Richard Stroud
United Kingdom
3mo
Edited
COPIERS AND FOLLOWERS UPDATE Hi everyone, here is another update from me on the back of all the geopolitical turmoil currently happening. Not surprisingly, markets have not taken the the news of the U.S and Israeli war with Iran well, with all markets today well down. Despite the news breaking out on Saturday, the U.S markets were calm yesterday on the hope this will be like the recent 12 day war. However, Trump has now signalled that this war will contiune for however long it takes, so the markets have seemingly readjusted to a potentially much longer time frame. No asset class has been spared, with bonds and gold suffering every bit as much as stocks. As the Strait of Hormuz is facing a complete blockade, oil and gas prices have jumped on the fear of a global supply cut, as 20% of the world's oil supply is shipped through this route. Although most of this oil and gas is destined for Asia, it is inevitable that prices worldwide are affected. However, stock markets in countries such as South Korea and Japan have suffered particularly badly. As a result, the fear of rising energy prices has sent bond prices falling and yields soaring, with the prospect of higher inflation and with it the expectation of fewer rate cuts fuelling the drop. Gold has also unusually fallen back, as it is usually a safe haven in volatile times. However I suspect it's recent meteoric rise in price has been partly due to speculation and a correction was due in any case. I suppose in retrospect it was probably predictable what was going to transpire in Iran, with massive naval fleets heading towards the Gulf last week a fairly good indicator. However, in terms of the portfolio and any adjustments to make, I think it is wise to stay the course and not rush to be too defensive. History teaches us to be careful when considering the long-term effects of geopolitics and generally these type of crises tend to have minimal impact on stock markets over the medium-term. The most recent example of this was back in 2022 when Russia invaded Ukraine. Oil and gas prices surged far more back then than they have this time round and stocks, particularly in Europe, plummeted in the aftermath. However by January 2023 the Stoxx 600 was already above its high prior to the invasion and has continued to push higher since. In fact, the last two major oil supply shocks have occurred while the U.S economy was strong, as it is today, and caused little or no long term damage. For now the best thing to do is to sit it out and wait for things to calm down. Assuming the U.S and Israel achieve what they set out to do (which I know is quite a big if) investors anticipate a sharp fall in oil prices and with it a stimulus to growth and corporate profits. Of course I will be keeping a close eye on events as they transpire but for now we can sit back in the knowledge that our portfolio is well diversified and will be able to withstand any short-term pull backs well. Wishing you all a great rest of the week and please stay posted for more updates from me. Best wishes, Richard.
Not investment advice. The author may have financial interests in the mentioned instruments.
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