By now, you have likely heard the news regarding the situation in Iran, along with U.S. and Israeli involvement and the concerns surrounding uranium enrichment and broader geopolitical developments. We wanted to briefly address what is happening and discuss how it relates to your portfolio.
Historically, geopolitical risks tend to create sharp market volatility, but that volatility is usually short-lived. In this case, the President has indicated that the situation could resolve within a matter of weeks, although it is certainly possible that it lasts longer depending on how events unfold. Generally speaking, markets react with volatility during these events, but the impact is often temporary.
Watching Energy Supply Implications
The primary concern right now is energy. We are seeing this reflected in energy markets, where prices have risen meaningfully. Approximately 20% of global oil flows through the Strait of Hormuz, which makes it a key area of focus. At this point, the initial damage does not appear to be significant. The larger concern would be if the conflict continues and oil is unable to move through the strait, disrupting the supply chain. That type of disruption could create renewed inflationary pressures.
What This Means for Your Investing
So how are we thinking about this in the context of your portfolio and our overall investment philosophy?
We do not build portfolios around short-term events. We build portfolios designed for longevity—portfolios that are designed to withstand the ups and downs of markets and events like this. While this situation is concerning and something we are closely monitoring, it is also something we plan for. Over the past 10, 15, and 20 years, we have consistently focused on investing for the long term and preparing for periods of uncertainty.
There are a few key points to keep in mind.
First, diversification. We own stocks, bonds, cash, and in some cases, real estate. We avoid over-concentration in any single area. During this recent period of uncertainty, we have seen bonds and interest rates behave as expected, helping provide stability within portfolios.
Second, perspective. Markets have experienced a strong run over the last several years—and arguably over the past decade. When markets cool off during geopolitical events, it can sometimes result in a modest correction within what is otherwise a healthy environment. Corporate earnings remain solid, and the broader economy appears to be in relatively good shape. We are also navigating the continued evolution of AI and its potential long-term impact on businesses and markets. Along those lines, we have made some incremental adjustments, modestly favoring value over growth, but within the context of a disciplined, diversified approach.
We Have Planned For This
Ultimately, we come back to the same principle: we have planned for this. We have planned for volatility with appropriate cash and liquidity in your portfolio. We have planned from an income perspective. Our allocation is designed to help you stay steady, regardless of what happens in the short term.
Our goal with this message is to share our perspective and reaffirm that we believe your portfolio is positioned thoughtfully for a range of outcomes.
As always, periods of volatility are when we aim to step up the most for you. If you would like to schedule a phone call or meeting to review your portfolio specifically and discuss how it has responded, please reach out to your wealth coach. We are here to help you feel confident about your financial plan. If volatility is causing concern, let us walk through it together.
Thank you for your time, and we look forward to connecting soon.