Discretionary Portfolio Management Update: Spring awakening

The Iran conflict remains unresolved, and despite already rising inflation, stock markets have continued to trend upward in recent weeks. The market evidently continues to view the conflict as temporary, and the surprisingly strong earnings season in the U.S. has also served as a positive catalyst.

Spring brings not only longer days and rising temperatures, but also, as a rule, a noticeably more positive overall mood. This seems to have rubbed off on investors in recent weeks, because although the geopolitical situation remains unresolved, the U.S. stock markets in particular are once again hovering near all-time highs. The stock markets are thus anticipating a resolution to the conflict, even though there has been no significant progress in recent weeks.

Street of Hormuz remains closed

The geopolitical situation is therefore tense, particularly due to the continued closure of the Strait of Hormuz, which is considered the lifeline of global oil trade. As the chart below shows, shipping traffic has once again come to a complete standstill – despite earlier hopes to the contrary.

Source: Bloomberg, own calculations, Data as of 15.5.2026

The ceasefire provides the necessary breathing room for diplomatic negotiations, but the pressure to reach an agreement soon is mounting by the day – Iran appears to have the upper hand and is clearly playing for time. The latest inflation data point to significant price increases not only in Europe but also in the U.S. At 3.8% in April, U.S. inflation reached its highest level in over three years, which is likely to put new Fed Chair Kevin Warsh under pressure right at the start of his term. While the ECB is already considering raising key interest rates, the Fed is likely to adopt a wait-and-see approach.

Profits are soaring

As previously mentioned, the market is largely ignoring the risk factors discussed. One of the main reasons for this is the fact that companies delivered exceptionally strong results in the first quarter. More than 80% of the reporting companies in the S&P 500 exceeded analyst expectations in the first quarter, in some cases by a wide margin – Corporate America is thus once again defying the adverse environment.

Nevertheless, the recovery of the overall market should be viewed with caution – because while the upturn at the beginning of the year was driven by the broader market, the most recent price increases are once again attributable to a handful of tech companies amid the AI euphoria. The distribution of performance also suggests a certain vulnerability – since the start of the year, S&P 500 companies have ranged from -55% to +500%, and contrary to expectations, only 55% of them have performed positively.

Orban voted out!

Even though the presidential elections in Hungary have limited relevance for global capital markets, the change in power in Hungary is an important sign of life for European values and unity. The peaceful transfer of power in Budapest was by no means a foregone conclusion, and with Peter Magyar in office, the European Union is also strengthened – a development that is more important than ever in light of Trump’s latest tariff threats.

We’re navigating by sight!

The situation in the markets thus remains unclear – solid corporate earnings are offset by a tense environment with numerous sources of risk. We are surprised by the markets’ complacency, which is why we consider a balanced and, above all, risk-conscious positioning to be appropriate.

 

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