Zooming Out: Finding Perspective Amid Volatility

Contributors

arket volatility has an undeniable pull on investor uncertainty and concern. Given the current environment – War in the Middle East and soaring oil prices – it is natural to feel an inclination to lower sails when markets feel like a tempest. We are now more than three weeks into the most recent conflict with Iran and feel it is imperative to zoom out for a wider perspective.

Historically, investors have been here before. The specifics and nuances are different, however geopolitical shock that rattles markets and dominates headlines is not a unique story plot. In fact, we would expect to see equities and bonds pull back in the short-term. It is in times like these that looking through near-term volatility, focusing on underlying fundamentals and being in a diversified portfolio is most prudent.

Harkening back to what history tells us – market selloffs tied to oil supply shocks have had a tendency to be short-lived. While a sharp pivot in narrative can feel unsettling, they have often been followed by meaningful rebounds – highlighting how resilient markets are to geopolitical unrest, despite what headlines may suggest.

Here is a supporting visual from Capital Group that highlights various market selloffs tied to oil supply shocks and subsequent horsepower of markets.

Presently, the Iranian conflict has created volatile markets, but it also has the potential to hinder efficient transport of goods and energy assets through the region and to the rest of the world. The virtual shut down of the Strait of Hormuz is causing a spike in energy prices and consumers may feel the effects at the pump. There are other long-term factors to contend with – and ones we are keeping an eye on. Long term inflation could naturally impact companies and consumer willingness to buy. However, as we zoom out, our conviction remains grounded in corporate fundamentals and the durability of the U.S. economy, as earnings continue to demonstrate strength.

While we could not possibly predict a conflict such as this, we did anticipate the need for a more balanced approach to investing. For many investors, we have thoughtfully incorporated commodities, natural resources, MLP’s, nuclear energy, utilities and data center exposure as we aim to navigate perpetually changing economic factors. There may be a plot twist from time to time which is why we believe diversified allocations with an emphasis on these sectors provide a resilience and complement to traditional positioning.

As well, a selloff can often create investment opportunities – and we will continue to monitor ways we can maintain a long-term approach that aligns with your specific goals and strategically find entry points as they present.

In times like these, thoughtful conversations matter. Global events will always evolve and we are here to help you navigate what’s happening and it impacts your unique situation. We welcome any conversation and are always here to provide perspective and supportive resources.

Diversification does not assure a profit or protect against loss in declining markets, and diversification cannot guarantee that any objective or goal will be achieved.