The What & Why of Markets 

The What: Markets Show Composure
Despite escalating conflict in the Middle East, markets remained relatively calm. Oil and gold moved higher, but equities, bond yields, and currencies were largely stable. Investors appear to be monitoring events closely without pricing in worst-case outcomes — for now.

The Why: Markets Often Look Through Geopolitical Shocks
History shows that markets typically recover from geopolitical events. On average, stocks fall around 5% initially but rebound to post gains over the following 12 months.

The What: CBA: A Case Study in Defensive Overpricing
Commonwealth Bank is now trading at over 30x earnings, roughly 50% above its sector. Even optimistic growth scenarios suggest potential downside. This illustrates how safety can come at a steep cost when market sentiment detaches from fundamentals.

The Why: Valuation Discipline Matters Most When Safety Feels Expensive
CBA’s current valuation shows how defensive stocks can become overinflated when investors chase perceived safety. In uncertain markets, starting valuations still matter. History shows that overpaying, even for quality, limits future returns and leaves portfolios more exposed than they appear.

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