This Week in Review | Iran Conflict Volatility, March PMIs, Gold’s Recent Sell-Off

Transcript

Hello and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they mean for markets, and most importantly the potential impact for investors. To stay up-to-date with our latest market insights, subscribe to our YouTube channel or visit Fisher Investments.com. Now let's review what happened this week.

First, navigating recent market volatility. This week, global markets have been anything but calm. On Monday, stocks surged and oil prices fell following news that President Donald Trump would delay strikes on Iran's energy infrastructure. Since then, stocks have continued to fall while oil has continued to climb. As of filming, the S&P 500 is nearing that -10% line commonly thought of as a correction. But amidst the flurry of headlines and market reactions, investors are wondering how should they respond to the volatility.

The answer is far less exciting than you'd think. This week's developments are a perfect example of how quickly things can shift. Markets pre-price in worst-case scenarios in one moment. Next they're rallying on a glimmer of optimism. Let's revisit some recent market downturns to put this into perspective. Last year stocks declined roughly 19% in just six weeks as markets rapidly priced in worst-case scenarios from President Donald Trump's tariff announcements. Yet within three months, stocks had fully recovered and went on to end the year nicely positive.

Even in the case of Russia's 2022 invasion of Ukraine, which many are comparing to today, yes, stocks declined about 25% over a ten-month period, but that was a historically short and shallow bear market, and stocks regained their prior highs only 14 months later.

These examples highlight how incredibly efficient markets are at pricing in widely known information almost instantaneously. This means that trying to outsmart the market by making big moves during periods of uncertainty is often a losing game. We believe in times of global uncertainty, markets reward discipline and patience. Long-term investors should stay focused on their long-term financial goals and avoid emotional portfolio moves.

Next flash March PMI readings. This week, March flash purchasing managers indexes or PMIs for the US, UK, eurozone and Japan were released, offering fresh insights into recent business activity. PMIs are a valuable tool for gauging economic health, and March's readings highlighted some underappreciated strengths across the globe. Despite ongoing concerns about global economic stability, March's flash PMIs continue to signal private sector growth in the US, UK, Eurozone and Japan. Composite PMIs across all four regions remained in expansionary territory, with readings above 50 signaling growth. Notably, the eurozone manufacturing PMI jumped to 51.4, beating expectations and marking the strongest growth in three years. However, manufacturing in the UK and eurozone reported lengthening supplier delivery times, reflecting supply chain disruptions caused by the war in Iran. The key takeaways for investors isn't about the PMI values or even the rate of change. It's about how reality measures up against expectations. And right now, the global economy is showing greater resilience than many anticipated, even in the face of significant headwinds. For investors, PMIs provide a snapshot of business activity and a reminder of the underestimated strength of businesses and the global economy. This resilience suggests that the bull market still has room to run, even if there are occasional bumps along the way.

Finally, gold's recent sell off. Gold is often seen as a safe-haven asset during times of stress, but as we noted in a recent Market Minder article, this year has shown that even perceived 'safe' investments can act unpredictably. Despite ongoing fears surrounding global conflicts and inflation, gold prices have fallen sharply in recent months. After peaking around $5,400 per Troy ounce at the end of January, gold has fallen about 18%. This decline is counterintuitive to what many investors expect during periods of geopolitical uncertainty and inflationary pressures. So what's driving this paradox? The answer lies in the conflicting forces at play. While inflation fears typically boost gold prices, they also lead to expectations of higher interest rates. Since gold doesn't pay interest or dividends, rising-rate expectations make it less attractive. Ultimately, that can drag its price down.

For investors, gold's unpredictable behavior makes it a poor choice for long-term investment strategies. Its rapid price swings can tempt investors into the classic mistake of buying high and selling low. Instead, for those focused on reliable long-term growth, stocks remain a more effective option, in our view. Gold may glitter in the short term, but it's discipline and patience in the stock market that truly pays off over time.

That's it for this week. Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series, Three Things You Need to Know this week, released every Monday. You can also visit FisherInvestments.com anytime for our latest thoughts on markets. Thanks again for joining us, and don't forget to hit like and subscribe.