Differentiate to diversify

The Strait of Hormuz, which moves about 20% of global oil, has seen many ships that normally travel through it curtail their activity. Consequently, WTI oil was up over 36% in the five days after the oil supply shock began. Yet equities barely budged, signaling a temporary supply shock, not a larger crisis. Historically, after similar price spikes equities tend to move higher while oil prices decline — further evidence for avoiding emotion-driven investing.

We expect market leadership to broaden beyond mega-cap tech in U.S. equity markets. For growth heavy portfolios, the narrowing gap between growth and value signals a potential need to add value investments to reduce concentration risk and improve diversification.

Tensions between the U.S./Israel and Iran have recently boiled over into a military conflict, which has given many investors the jitters. However, our research shows that equity market pullbacks resulting from geopolitical events are often short lived with the S&P 500 typically higher in the months following these events.

The U.S. and Israeli attack on Iran, resulting in the elimination of Iran’s leadership, is a serious development for regional political and global energy price stability as it could set off moderate to material demand-supply imbalances.