ClearBridge Investments’ head of economic and market strategy, Jeffery Schulze, suggests that equities have historically demonstrated resilience and delivered solid returns following geopolitical ‘dips,’ including periods of conflict in the Middle East. Schulze’s analysis comes as tensions involving Iran have caused Brent crude to rise above $US80 per barrel, triggering short-term volatility in equity markets. However, he believes underlying economic fundamentals should mitigate any significant adverse economic impacts.
Schulze emphasises that the United States’ position as a net energy producer, coupled with decreased household energy expenditure, provides a buffer against escalating oil prices. According to Schulze, historical trends indicate that investors should capitalise on opportunities emerging during periods of geopolitical unease. “History shows that investors should take advantage of the opportunity that appears to be emerging, with solid returns in the S&P 500 Index following historical geopolitical dips,” he said.
He noted that US equities have, on average, experienced positive returns over the 1-, 3-, and 6-month periods following past geopolitical flare-ups. Schulze anticipates that the US economy will remain resilient in the face of current challenges. He attributes potential oil price increases primarily to supply-side shocks, which he expects the Federal Reserve to monitor without significant intervention. He also projects that core inflation measures should remain largely unaffected.
Ultimately, Schulze suggests that long-term investors are likely to be rewarded for strategically investing during periods marked by geopolitical uncertainty. ClearBridge Investments is a global investment manager offering a broad range of strategies to institutional and individual investors. The firm focuses on delivering long-term investment results through active management and fundamental research.
