Key takeaways

• Most assets have recently been selling off together, with USD, as well as energy and IT stocks seemingly the only safe havens. Markets were working through the consequences of a risk scenario of high-for-longer oil prices, which could hit growth and boost inflation. While they did not fully price in stagflation, they are relieved at Mr Trump’s declaration that the conflict would “very soon” be over.
• Yet, the key will be when and how oil will flow through the Strait of Hormuz, which remains unclear and will continue to lead to volatility. While volatility strategies can provide opportunities without taking a directional view, the extreme ups and downs in recent days illustrate the danger of timing decisions and support our preference for building resilient portfolios.
• For the medium term, we remain of the view that the reduction in concentrated positioning and the lower valuations will help bring back investors when oil starts to pass through the Strait of Hormuz again. AI innovation, investment and oil production should continue to support the US economy. However, managing short-term volatility is clearly key, with a focus on quality and multiple diversifiers.

Please refer to the full report for details about the event and our investment view.

“Overweight” implies a positive tilt towards the asset class, within the context of a well-diversified, typically multi-asset portfolio.

“Underweight” implies a negative tilt towards the asset class, within the context of a well-diversified, typically multi-asset portfolio.

“Neutral” implies neither a particularly negative nor a positive tilt towards the asset class, within the context of a well-diversified, typically multi-asset portfolio.

https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/stagflation-fears-fall-on-hopes-that-conflict-will-end-but-uncertainty-remains/