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The war in Iran dwarfs investment decisions. The narrative changes on a daily basis. The unusual combination of falling equities and rising Treasury yields reflects growing inflation concerns, driven largely by oil prices climbing above $100, which ripple through transportation, food and manufacturing costs. If the war doesn’t get resolved soon these higher energy costs will become embedded. The mistake would be to increase interest rates in an attempt to curb inflation, the same mistake that was made following the Covid spike in inflation, as this was caused by supply, not demand issues. High energy prices already act as a brake on consumer discretionary spending just as a tax would.

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At the time of writing the markets have rallied on word that the Iranian president, Masoud Pezeshkian is ready to end the war, but I doubt it’s that easy and Iran will want to appear to have won, as will Trump. The pendulum can therefore swing either way and as we have seen, does so wildly on a daily basis.

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At times like these, calm is what is required when looking at your investment portfolio. The former US Treasury Secretary, Robert E. Rubin in his book, “Risk as a Range”, highlights the reason to hold as much cash as you feel comfortable with, even in good times, recognising that there is no possibility of a significant gain if markets do well, nor if markets do badly. We have always advocated that our clients hold enough in cash to not have to worry about short term price fluctuations and therefore can sleep well at night whilst waiting for things to sort themselves out.

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Earnings season is fast approaching when we might get an idea of how the war has affected company earnings, but I doubt that they will be yet fully incorporated so we will need to wait a further quarter. I fully expect continued whipsawing in markets to continue, but remember, when the market storms rage, it is the long term investor who stays the course that wins.

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Happy Easter!

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Comments from James Scott-Hopkins, Founder of EXE Capital Management. The views are those of the author only.

The above does not constitute a recommendation to buy or sell specific funds or assets and advice should be sought from your financial advisor as to the appropriateness of this for your portfolio. The value of investments can fall as well as rise. Past performance is no guarantee of future returns.

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