The shocks keep coming. Last year, it was tariffs and AI (artificial intelligence). This year began with the military extraction in Venezuela, US threats over Greenland, and then the joint US-Israel attack on Iran. The latter has brought with it the closure of the Strait of Hormuz and the loss of one fifth of global oil shipments.

At the time of writing, we have a ceasefire, but the stand-off over the Strait continues. There is a long-standing relationship between energy prices and the economic cycle, as well as the market cycle. Nothing is linear though, it depends on whether the energy movements are demand-driven or supply-driven, and the underlying health of the economy matters too.

At the same time, there are worries about the health of the stock market. Before the attacks on Iran, we had seen considerable churn in individual stocks and sectors, as investors alternate between excitement and fear over AI. There are also concerns that private debt associated with these industries may be entering a mini credit crisis.

In our outlook for the second quarter, we examine the underlying strength of the US and European economies, and how much damage the energy shortages could do to growth and inflation. We investigate the recent rotation in the stock market and ask whether value has emerged in afflicted sectors. Lastly, we look at the controversial defense sector through the lens of responsible investing.

Should you have any questions in relation to the content within The Davy Wealth View, and what it means for your portfolio, please contact your Davy adviser.

Donough Kilmurray

Chief Investment Officer