A sombre mood has settled over financial markets, exacerbated by the ongoing war in Iran. The conflict has cast a long shadow, impacting markets globally and adding pressure to fund managers already struggling to outperform benchmarks like the ASX 200. Even before the war, many large-cap fund managers were finding it difficult to beat the ASX 200, due, in part, to the surprising performance of Commonwealth Bank.
The ASX 200 is holding up better than the S&P 500, down 7.6% from its peak compared to the S&P’s 9.1% fall. However, corrections are becoming widespread. The Dow Jones, Nasdaq 100, and Hang Seng are all experiencing corrections, with European and Japanese markets teetering on the brink. Even precious metals and cryptocurrencies are showing significant declines, with gold, silver, and Bitcoin all down from their highs.
While the S&P 500 has avoided a formal correction, its price-to-earnings multiple has decreased, and a significant portion of its constituent stocks are down by 10% or more. Despite this, equity market exposure remains reasonably high, and cash levels remain low, indicating that investors are still hoping for a swift resolution to the war. Vantage Asset Management is a macro fund. Vantage Asset Management’s chief investment officer, Nick Ferres, notes that every asset class has sold off to some extent as the war has dragged on.
Bank of America’s strategist, Michael Hartnett, suggests that US President Donald Trump’s declining approval ratings might force the White House to implement policies addressing affordability issues, potentially boosting consumer discretionary stocks. Hartnett also points to historical data, noting that markets typically rebound after corrections, offering some hope amidst the current gloom.
