Invesco Canada

How will markets react to the conflict in the Middle East? Brian Levitt, our chief global market strategist’s stock answer for the last six weeks: “It depends on the duration of the conflict.” He thinks that may not exactly be the case.

Many assumed that if the conflict lasted more than a few weeks, it would be meaningfully negative for risk assets. But markets appear to have absorbed the shock. The S&P 500 Index is now nearly flat since the conflict began in February.

It seems markets crave narrative closure more than calendar precision. Are conditions getting better relative to deteriorated expectations? And the bar for relief has been surprisingly low. Even talk of a ceasefire, like we got last week, sustainable or not, has been enough to lift risk sentiment.

It appears that investors, particularly after last year’s Liberation Day whipsaw, have shown little appetite for pricing in open-ended worst-case scenarios.

Read our latest weekly market commentary.

https://inves.co/4vvR0po

Expectations for a synchronized global expansion in 2026 have faded as the Middle East conflict increases the probability of a slowdown. But think back to a year ago in the midst of another uncertain time and the historic surge in stocks after President Trump paused his Liberation Day tariffs. So where does that leave us today?

• As markets have repriced for slower growth, we favor staying invested, but for the time being have moved back toward an emphasis on higher-quality, larger-cap stocks and US dollar exposure.
• Abrupt exits from stocks precisely when markets may be most prone to sharp recoveries may be poor timing.
• In uncertain environments, we believe discipline matters more than conviction in any single outcome.

Read our latest weekly market commentary.

https://inves.co/4c3zyzG