The deeply troubling events in the Middle East have been dominating headlines and have also impacted investment markets.

In the last few days, investment markets around the world have been concerned about the risks of a broader conflict, most notably involving Iran.

There is also the prospect of increasing oil prices, which impacts global growth.

These events are impossible to predict, and markets do not like uncertainty.

However, history tells us not to overreact from an investment perspective to unpredictable global events.

It’s also important to bear in mind that when share prices drop due to global uncertainty, it will mean that the business is likely to be more attractive to a potential buyer.

In other words, for profitable businesses, as their share prices drop, their valuations become more attractive.

Global concerns have understandably taken the focus off interest rates.

However, interest rate increases have been the main driver of share market weakness in the last year.

A couple of months ago, expectations were that interest rates both in Australia and overseas would start to come off in 2024.

However, better-than-expected economic conditions have led to a revision of those forecasts, and interest rates are now likely to stay higher for longer.

So, good news in the avoidance of a recession has led to expectations changing around interest rates.

The upside of interest rates being higher for longer is that returns for conservative investments in cash and fixed interest are returning to more ‘normal’ historical levels after a very long period of very low returns.

If you have any concerns or would like more information on your own investments, please contact us.

Regards,

John