The environment is more uncertain with the conflict in the Middle East, but strong fundamentals support market dynamics.Since the beginning of the conflict in the Middle East, stock markets have been operating in a more uncertain environment, marked by rising energy prices, the return of inflation risks, and increased sensitivity to geopolitical developments. However, this shock comes at a time when macroeconomic fundamentals remain strong, especially in the United States, where growth is supported by consumption, budgetary impulse, and investment linked to artificial intelligence. In the euro area, growth appeared more moderate but resilient, with inflation returning to levels significantly more contained than in 2022. At this point, the conflict does not challenge the overall trend of stock markets, but it clearly modifies the balances and performance drivers. On the macroeconomic front, the contrast between major regions remains significant. The United States enters this phase with higher absorption capacity, thanks to stronger growth and greater energy independence. On the other hand, the euro area appears more vulnerable to a shock in commodity prices, in a context of weaker growth and still significant dependence on external supplies. For stock markets, this divergence is essential as it determines the resistance of profits. Before the conflict, expectations for earnings growth remained high globally. The issue is not an immediate collapse of results, but rather a gradual revision through several channels: direct exposure to the conflict zone, tensions on supply chains, cost pressures, impact on the final consumer, and potential tightening of financing conditions if the conflict were to persist. The conflict does not appear at this stage to challenge the structural trends that support global profits.As a result, our reading of stock markets remains constructive, but more selective. The conflict does not seem to challenge at this stage the structural trends that support global profits, starting with artificial intelligence, electrification, and the growing needs for energy infrastructure. However, it accelerates the revaluation of themes that were sometimes in the background, particularly energy sovereignty and supply autonomy. For the investor in stocks, the current period calls for less disengagement and more repositioning. In a less linear market, more sensitive to exogenous shocks and more demanding on valuations, agility, diversification, and the ability to identify pockets of truly resilient growth appear more crucial than ever.
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