It goes without saying that Global equity markets have experienced increased volatility since the advent of President Trump’s war in the Middle East. This update covers the context of the recent selloff, the fundamental economic backdrop, and how our Investment Managers are actively using this period to buy into undervalued markets and high-quality investments.

What was the economic reality before the geopolitical shock? Coming into the Iran conflict, both the US and Australian economies were firmly in an earnings upgrade cycle. The US not only managed a soft landing but also saw its economic growth accelerate through the second half of 2025 and into early 2026. Domestically, we also saw a distinct uptick in growth following three rate cuts last year, which pushed the Australian market into an earnings upgrade cycle. This was the current state of play until the commencement of hostilities, which created the “Fog of War”.

Australia is currently navigating a rate-hiking cycle due to productivity and inflation challenges. However, earnings per share growth for Australian shares is now forecast at 20% for this year and 9% for 2027. In short, before the conflict, underlying earnings were being upgraded, and markets were pushing to new highs. The current war and geopolitical uncertainty have temporarily masked this underlying strength both here and in global markets.

Markets have absorbed four major supply shocks in the last six years: COVID-19 in 2020, the inflation shock and Ukraine war in 2022, the “liberation day” tariffs in 2025, and now the Iran conflict in 2026. While each episode is concerning at the time, history shows they typically have a relatively short-term impact on growth and ultimately represent highly lucrative buying opportunities. We see this crisis as no different.

Currently, US earnings growth is rising and forecasted to jump from 14% this year to over 20% next year. Our discussion with our Investment Managers indicates that the case for investing now is based on a prediction about how long it will take for the geopolitical situation to resolve. These managers are running the ruler across a range of quality businesses, both domestically and globally, and asking whether these businesses will become meaningfully cheaper and whether their underlying earnings fundamentals will remain intact. In most cases, the answer is a resounding yes.

Before the Iran conflict, while broader indices were strong, large pockets of the market had already sold off sharply. Specifically, the “Magnificent 7” (hyperscalers), tech, software, and broader “quality” factors were punished due to perceived AI disruption risks. Our Investment Managers are using this period of broader market weakness to increase conviction positions and initiate new holdings in businesses they believe are mispriced due to indiscriminate selling. In essence, markets have gone on sale.

While none of us knows exactly how this will end, there is a strong incentive for all parties involved to resolve the conflict. The US, for its part, with midterms not far away, wants to get out of the conflict and focus more on its domestic economy in the hope of rescuing Republican Seats before the midterm elections in November.

As we know, Share markets are forward-looking mechanisms that look through immediate noise and rally well before the conflict officially concludes. As we saw with the tariff shocks last year, when market sentiment eventually turns, the subsequent relief rally can be aggressive and quick. We are already seeing glimpses of this: during recent “risk-on” relief rallies, with significant rebounds in the big tech names.  Historically, investors will be rewarded. It is a question of when, not if.  

Here at Future Gen Solutions, our holistic approach is comprehensive as we ensure your financial house is in order, leveraging success to grow your wealth while protecting and transferring it to future generations.