【Founder’s Article】 Geopolitical triggers have accelerated valuation adjustments, and the key timing has now been revealed!

This content will also be included in the April Investment Monthly Report “Founder’s Introduction” published on 2026.03.27

Dear all,

In the March Monthly Report introduction, we pointed out that oil prices will become a key factor influencing liquidity and stock levels, and warned that when WTI oil prices rise above $70 per barrel, it could lead to “the Federal Reserve delaying rate cuts, increased chances of a market decline, and the need to reduce positions.” Subsequently, tensions between the US, Iran, and Israel escalated, causing oil prices to surge rapidly, with WTI crude oil rising 35.9%, while gold was impacted by rising real interest rates and fell by -13.7%. As the US-Iran conflict continued to intensify, stocks, currencies, bonds, and gold all experienced declines, the US dollar index rose, risk capital fled, and valuation adjustments arrived earlier than expected.

Note: Since 2/28 and 3/1 coincided with holidays, the statistical period has been moved back to the most recent trading day.

If you want a deeper understanding of our views over different periods, besides the reports, our research team will accompany you this year with quarterly outlooks and thematic sharing sessions. Ralice will kick off on 3/31, sharing insights on asset re-pricing amid geopolitical conflicts and rising AI concerns. Join us!

1. Current market reactions remain at valuation correction stage, not yet reflecting fundamental impacts

Since February, we have observed that whether through 13F filings, large trader positions, or ETF fund flows, capital has been moving into energy stocks. Meanwhile, some inflation data has also started to stir. On 3/2, the key “raw material price index” in the ISM manufacturing report jumped sharply from 59 to 70.5, with nearly all purchasing managers reporting rising prices; on 3/18, just before the Federal Reserve meeting, the Producer Price Index (PPI) also showed a third consecutive month of increase, causing US stocks to decline. Notably, these data have not yet fully incorporated the impact of the US-Iran conflict, further deepening market concerns about rising inflation pressures.

Changes in inflation expectations have also quickly transmitted to the interest rate markets. Despite the Fed repeatedly emphasizing “ongoing observation and high uncertainty,” markets have already significantly lowered the probability of rate cuts this year, and are beginning to price in the possibility of rate hikes by the European, UK, and Canadian central banks.

Currently, the market is beginning to resemble the early stages of the Russia-Ukraine conflict, with valuation adjustments mainly focused on “inflation” and “interest rates.” However, so far, there has been no further reflection of earnings downgrades at the fundamental level, indicating the current market still regards this round of shocks as a “short-term event”. The IEA has also quickly released strategic oil reserves, aiming to keep actual supply gaps around 3% to 5%, with the impact expected to last about one quarter.

2. Is there a Davis Double Kill, completing the correction of inflation > interest rates > economic fundamentals?

Will this evolve into a “Davis Double Kill,” with valuation and fundamentals declining simultaneously? We still believe that compared to the Russia-Ukraine war, the current situation is relatively protected.

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