Nedgroup Investments: What do recent events in the Middle East mean for investment portfolios?

Over the weekend, tensions in the Middle East escalated following unexpected developments in Iran. While the situation is evolving, we wanted to provide an update on our portfolios which remain well-positioned.

Our portfolio positioning

We’ve maintained a cautious stance across our strategies:

• Underweight equities
• Overweight bonds, real assets, and cash
• Limited exposure to mega-cap stocks

This defensive setup is specifically designed to help navigate periods of uncertainty like this.

Market reaction so far – things we are keeping an eye on

• Oil prices have responded, as expected, but remain stable as long as key shipping routes like the Strait of Hormuz stay open.
• Gold and broader markets have shown muted reactions, suggesting limited immediate impact.

What is happening geopolitically?

The situation is complex and may evolve over the coming weeks. While the U.S. response was unexpected, early signs suggest limited escalation from regional groups. Diplomatic paths may be challenging, but for now, the response appears contained.

What should investors do now?

As always, we are closely monitoring the situation and remain ready to act if required. In the meantime, our defensive positioning allows us to seek opportunities if markets adjust. Over the long term, history has consistently shown that staying invested is the best strategy. A recent Deutsche Bank study shows the S&P 500 typically drops around 6% in the three weeks following such events but then rebounds over the next three weeks.

We therefore encourage investors to remain focussed on your long-term objectives and ignore the noise as much as possible.