Heightened Geopolitical Uncertainty
Global markets continued to pull back last week as the conflict in the Middle East enters its fourth week and uncertainty persists. The conflict also weighed on last week’s central bank decisions to maintain current policy levels. Compared to a week ago, investors now expect the Bank of England and European Central Bank to hike instead of cut interest rates in 2026.
The MSCI All Country World Index was down for the fourth consecutive week—its longest stretch in more than a year—and likewise, the S&P 500® fell below its 200-day moving average for the first time since last May. U.S. Treasury yields moved higher across the curve as investors pared back expectations for multiple Federal Reserve rate cuts, pushing the 2-year yield to its highest level since last July. Gold prices remain volatile and experienced their largest weekly drawdown since 1983.
Market Outlook
Earnings estimates for 2026 have remained resilient despite geopolitical uncertainty. However, elevated oil prices could begin to weigh on consumer activity if the conflict is protracted. We continue to emphasize diversification as a theme for navigating this period of uncertainty.
Chart of the Week
The United States has become a consistent net energy exporter since 2022, which is a major difference from past oil shocks.
Relatively lower sensitivity to global oil production has supported U.S. equity markets as conflict in the Middle East continues.
We expect short-term volatility to remain elevated and continue to recommend that investors stay broadly diversified.
