The InvestSense Podcast

Andrew Hunt often says Markets = Faith x Liquidity. While faith may have peaked, liquidity clearly hasn't yet. His message is to stay invested for now, while avoiding the frothiest and most volatile areas of the market which will move quickest and most if the dynamics of that equation deteriorate further. Is Korea over the last 6 weeks or so the canary in the coal mine? He will also be watching for the point where quantitative tightening actually starts to shrink liquidity rather than just reshuffle it, at which point we will have another, possibly hasty conversation.

As the US reporting season gets underway, volatility has been creeping back into markets, and in a distinctly uneven way.In summary, the Australian economy is looking a little resilient, and a flat year behind us means a more stable valuation starting point, not such a bad thing. The volatility in hotter corners of markets is worth discussing alongside how portfolios are positioned around it. While we see no reason to run for the hills, the next year may not look like the last one. What we are seeing in Korea might be an early signal, or big tech earnings may continue to impress and settle things again. 

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Most markets finished the week lower, though the Australian market held its ground. The pattern is telling: a dip through the middle of the week and a partial recovery into Friday.  The oil price traced almost the exact mirror image, spiking to around US$80 a barrel before easing back to US$76. 

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Markets moved through a defining week as three storylines, a fragile Middle East de-escalation, a softer US labour market and a renewed wobble in the AI trade, reset expectations for the second half of 2026. It also closes a financial year that, in hindsight, was almost entirely about momentum and about being on the right side of the AI trade.

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We discuss the RBA’s reaction function and a potential Fed regime change under new Chair Kevin Warsh with Christian Baylis at Fortlake Asset Management. We like talking to Christian every few months as he manages a go anywhere absolute return strategy and so is relatively unbiased but also a subject matter expert in rate markets. The quick take: the regime change at the Federal Reserve is bond-friendly at the long end and bond-unfriendly at the short, while the RBA's hard-won credibility leaves Australian rates biased higher for longer because the RBA is not quite incentivised enough to go too hard win inflation. 

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Markets spent the week leaning into the better news from the Gulf, however Iran–Israel ceasefire is not straightforward.

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A week that began with hope ended with a reminder that geopolitics rarely moves in a straight line. The US and Iran signed a memorandum of understanding in Switzerland on Friday, formally opening a 60-day ceasefire and lifting the naval blockade on the Strait of Hormuz. Brent crude slumped almost 7% over the week to just above US$80 a barrel, the lowest in three months, while the Dow closed at an all-time high midweek. By Sunday, however, fresh Israeli strikes on Hezbollah, Iranian threats to re-close the Strait, and pointed comments from President Trump had markets reaching for the seatbelts again.

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The US/ Iran deal appears to change everything and risk assets responded accordingly. But Andrew Hunt warns against the temptation to declare the episode over and return to the pre-shock world of narrow, liquidity-fuelled equity gains. Oil-shock inflation is slow to appear and slow to leave. The headline has changed. The pipes have not.

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Markets endured a week of whiplash. Brent crude pushed toward US$98 a barrel as Israel and Iran exchanged fire and a US Apache helicopter was reportedly shot down near the Strait of Hormuz. Then on Friday a single Truth Social post, President Trump cancelling planned strikes and claiming a deal had been "approved by all parties”, sent Brent back well below US$90, the Nasdaq up 3.5% and ten-year Treasury yields nine basis points lower in hours. President Trump said on Monday that a preliminary agreement to end the conflict had been signed by the U.S. and Iran. Markets remain cautious: neither side has released the deal text, and shipping companies are delaying vessels through Hormuz until there is greater clarity. The message is familiar: position for diversification, not a binary outcome.

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Three months into the Iran-Israel conflict, markets have stopped treating it as breaking news and started treating it as the new wallpaper. Brent oil chopped between US$94 and US$98 a barrel last week as the latest Israel-Lebanon ceasefire wobbled, Hezbollah rejected the framework, and an Iranian oil tanker was hit in the Gulf. The Strait of Hormuz remains closed. The "rolling three weeks until resolution" narrative is now in its fourth month, and a long tail of higher input costs is feeding quietly into producer prices around the world.

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