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Last week we saw renewed fighting in the Middle East, with Iran declaring the Strait of Hormuz closed “until further notice” on Saturday, stating no vessels would be permitted to pass until foreign interference ends. Last week, Crude oil spiked around 8% following the escalation in tensions, although it did surrender some of the gains as the week wore on. However, despite the geopolitical uncertainty, global equities shrugged off the fighting, with the Dow making new all-time highs and the MSCI World Index closing less than 0.5% below its same milestone.
- One of our favourite Market Matters sayings is: “A market that can rally on bad news is a strong market.”
As the chart below illustrates, markets have ridden a roller-coaster of news over the last few months but the standout to MM is that despite the fighting still ongoing, the VIX, or Fear Gauge as it’s often referred to, is trading well below where it was in February. We don’t want to fall into a complacency trap, but for now stocks are rolling with the punches ahead of another important US reporting season, starting this week with Goldman Sachs (NYSE GS) and JP Morgan Chase (NYSE JPM) on Tuesday.
However, the ASX is delivering a more frustrating performance than some of its peers in 2026 with a soft housing market and RBA hiking cycle weighing on consumer confidence, and certain sectors of the market – the chart below doesn’t even show the highflying Nikkei (+36%) Korean KOSPI (+77%) . At the same time the local index has suffered at the hands of some major earnings misses/downgrades from the likes of CSL, REA, WBC with the later starting a period of underperformance by the influential local banking sector while their US peers pushed to new highs.
With expectations more muted towards the ASX into Christmas we remain bullish although we struggle to see a meaningful upside breakout unless the RBA adopts a more dovish stance and Australia’s housing market begins to stabilise – the average gain by the ASX200 in 2H over the last decade is almost 4% which would take the index back towards its all time high ~9200 which does feel very achievable to MM.
