We were about to send you the following note on Friday… and then, within a matter of hours, the world changed.
February is ending with the S&P 500 down a modest 0.87%, but it certainly did not feel that way: for many investors, the month looked and felt like a bear market.
We were nonetheless heading into March with a constructive mindset, expecting an up month that would feel quite different from what we had just gone through.
Our view was (and still is) that valuations have largely reset and that selling pressure has, for the most part, been exhausted.
In the meantime, the geopolitical backdrop has shifted dramatically. The joint Israeli–American attack has thrown the Middle East into a new phase of turmoil, with intensified bombing, the direct involvement of several regional capitals, and mounting tensions around the Strait of Hormuz. The combination of strikes, counter‑strikes and increasingly heated rhetoric has inevitably pushed risk premia higher, particularly across energy, regional assets and parts of the credit market.
Market behaviour in this kind of episode tends to follow a familiar pattern. There is usually an initial wave of de‑risking sharp but relatively short‑lived followed by a more rational repricing once the real economic contours of the shock become clearer. In other words, geopolitical shocks typically produce an initial sell‑off that can prove buyable, provided they do not morph into a lasting macro shock (global recession, prolonged oil shock, meaningful disruption of trade flows, etc.).
History shows that once the emotional phase passes and the balance of power stabilises, equity indices often recover back to and sometimes beyond pre‑crisis levels over the following weeks and months.
In the current situation, the key question is less the violence of the first 48–72 hours and more the duration and scope of the shock: whether energy routes remain disrupted, how far the conflict spills over into other theatres, and how major powers and central banks respond.
As long as this remains primarily a geopolitical and financial shock, without tipping the global economy into recession, it is more likely to create exploitable volatility than a true regime change in markets.
Our stance is therefore to treat this as an acute stress episode to navigate, rather than the end of the bull phase that has been building over recent quarters.
Against this backdrop, our core convictions remain unchanged.
We continue to favour large‑cap energy, which naturally benefits from higher risk premia on crude, as well as materials, in a world of rearmament, infrastructure investment and energy transition.
We also maintain our bias toward the Mag Seven, whose combination of structural growth, strong balance sheets and technological leadership offers a resilient anchor in a more volatile environment. We will, of course, adjust tactical risk as the situation evolves, but the central message stands: do not confuse an acute geopolitical shock with a lasting macroeconomic break.
