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Iran
I wrote a couple of times here that over the past 40 years there have been 21 US airstrike campaigns in the Middle East and US equity markets have been higher 8 weeks later 95% of the time. Well, this week, US equities reached new all-time highs just over 6 weeks after the war broke out. Chalk another one up for looking through geopolitical shocks.
US equities are higher in spite of the fact that the Strait of Hormuz is still blocked and oil is up over 60% for the year. Even though the war isn’t over, for equity markets the war is over. And for those of you who think equity investors are delusional optimists the parallel I would offer here is to where we were more or less a year ago. Back then Trump had backed down from his initial tariff demands (in mid-April 2025) and after that markets rallied 20% in short order. At the time, there were plenty of bearish voices pointing out that the effective tariff rate had still risen from 2.5% to around 15% which would push inflation higher and growth lower. What were equity markets thinking?
In fact, they were right not to worry. The hit to the global economy from tariffs ended up being pretty muted. And this time, equity markets are again telling you not to worry about the inflationary impact of the oil shock. One quote I heard this week from an experienced investor was “the market is usually right”. In 2025 (and in 2023) the equity market was basically right. We will see how things turn out for the rest of 2026, but my base case is the worst of the Iran war shock is behind us.
AI job fears
I have also shown the chart below before, which shows a slowing in hiring for more junior employees after the introduction of Chat-GPT in 2022:
I think part of the story actually has nothing to do with Chat-GPT. Plenty of firms over-hired into the post-COVID re-opening boom of 2021 and the slowdown you see above is partly them adjusting to more appropriate staffing levels (you can see employment is also falling for non-AI adopting firms). But it is also true that AI change is not slowing down and if anything is accelerating: Anthropic, maker of the Claude model, has seen its revenues triple to $30bn p.a. in just the last 3 months.
While there will be plenty of disruption for white-collar business models including law, education and finance, I am not bearish employment levels overall. The US, where AI adoption is most advanced, has seen a couple of strong payroll numbers in 2026 and unemployment is currently falling not rising. The introduction of the internet and mobile upended retail and media business models in the 2010s and almost all banking is now done online. In spite of this, today’s UK unemployment of 5% is close to the lows seen 20 years ago. I have no reason to think it will be different this time. The post below, which I saw this week, encapsulates one reason why. “It’s never enough” should mean there will always be demand for jobs.
Chris Brown, CIO
cbrown@ipscap.com
The value of investments may fall as well as rise and you may not get back all capital invested. Past Performance is not a guide to future performance and should not be relied upon. Nothing in this market commentary should be read as or constitutes investment advice.
