Colin&Cie’s assessment of the current market situation
On 10 March – just a few days after hostilities broke out in the Middle East – we explained in an article why Colin&Cie is maintaining its neutral stance despite rising oil prices, rising interest rates and palpable nervousness on the stock markets. What has been happening in the financial markets since then – and what do the leading indicators analysed by Colin&Cie suggest at present?
Situation assessmentThe recent trend in the price of Brent crude is clearly illustrated in the chart below. Before the escalation began, the price was fluctuating within a range of USD 60 to 70 per barrel. Shortly after the attacks on Iran, it surpassed the USD 80 mark and peaked at around USD 120 per barrel. This was triggered by concerns over massive supply disruptions – caused by the blockade of the Strait of Hormuz and attacks on production facilities. Hopes of de-escalation – inspired by the resumption of diplomatic talks and the agreement of a ceasefire – have removed a large part of the risk premium from the market. As a result, the price of Brent crude has recently fallen back below the USD 100 per barrel mark. Prices traded on the futures market (red stars) suggest that the significant rise in the price of Brent crude is expected to be only temporary. However, with an expected level of around USD 80 per barrel over the next six months, the price would still remain above pre-war levels.
Chart: Brent crude oil price trend (Data: LSEG Datastream)
The resulting inflationary trend is reflected in the inflation expectations derived from the interest rate market. In the eurozone (see chart), the forecasted one-year inflation rate rose at times to 4% p.a. but has since fallen back to 3.2%. Although this represents a move away from the European Central Bank’s (ECB) target of 2% p.a., the rise remains moderate compared with the trend following the outbreak of the war in Ukraine in 2022. At that time, expected inflation reached around 8% p.a.
Chart: Inflation expectations in the eurozone (Data: LSEG Datastream)
As the guardian of price stability, the ECB would normally be required to raise interest rates in the event of persistently high inflation. In the current situation, however, interest rate hikes carry the risk of putting the brakes on the economy and weakening economic activity. This is because the problem at present does not lie in excessive demand for oil or fuel, but in tight supply. Countries such as Germany are therefore attempting to keep demand high through measures such as reducing fuel duty to ease the burden on businesses and households, and to support the economy. Nevertheless, the futures market (see chart) expects short-term interest rates in the eurozone to rise over the course of the year, albeit to a much lesser extent than initially anticipated. In the US, by contrast, interest rates are expected to fall slightly, as the Federal Reserve (Fed) has a mandate to promote full employment as well as price stability and is currently paying closer attention to labour market developments – even with rising inflation rates.
Our allocation to medium-term bonds (5 years) has proved advantageous. As five-year interest rates have risen less sharply than short-term rates in recent times, and as they carry less risk in the event of interest rate rises than long-term rates, they now offer a very good risk-return ratio.
Chart: Implied interest rate trends in the eurozone (Data: LSEG Datastream)
Equity markets
Hopes for a swift end to hostilities and a renewed fall in oil prices have significantly reduced investors’ risk aversion, which was still very pronounced at the beginning of March. As a result, the equity markets have recovered – albeit with regional variations. In the US (see chart), the S&P 500 index, which comprises the largest listed companies in the United States, has not only returned to its pre-war level but has subsequently even reached a new all-time high. Equity markets in emerging economies have already recouped a large part of the losses incurred in early March, whilst equity markets in Europe have so far shown only moderate signs of recovery.
Chart: Performance of the US stock market, showing 50-day and 200-day moving averages (Data: LSEG Datastream)
The data table below, which tracks the performance of the S&P 500 during 27 periods of crisis, shows that geopolitical events usually lead to short-term market declines and that prices often recover more quickly than many investors expect. On average, it took around 18 days after the onset of an event for the index to reach its low point, and around 39 days for it to return to its pre-event level. This pattern has been confirmed since the start of military hostilities in the Middle East on 28 February 2026: the S&P 500 hit its low after 21 days and returned to its pre-war level after just 31 days.
Data table: Performance of the S&P 500 during geopolitical events (Data: LSEG Datastream)
Conclusion, positioning and outlook
In times of heightened uncertainty, it is advisable for both professional and private investors to keep a cool head. Short-term market fluctuations should not lead to hasty decisions. A fact-based analysis, a careful review of portfolio allocation and disciplined adherence to a long-term investment strategy remain the most reliable guide.
Through our ongoing assessment of the situation, based on over 250 leading indicators, we at Colin&Cie gain the necessary insights to adjust the weighting of asset classes where necessary. As no such signals were present either at the beginning of March or to date (as of the date of publication: 22 April 2026), we have remained calm and have maintained our neutral positioning to date.
We continue to monitor the geopolitical situation and the course of the war very closely and are prepared to make appropriate tactical adjustments should there be significant changes in our indicators. Even though peace negotiations have begun, the oil price has fallen, and the stock markets have recovered, the risks have not completely disappeared. The markets continue to operate within a high-risk geopolitical environment involving numerous states – ranging from the Middle East conflict and the war in Eastern Europe to strategic claims over Greenland, as well as the political tensions between the US and Venezuela and Cuba.
Disclaimer - legal notice
This publication was produced by the Investment Office of the Colin&Cie Group. The information and opinions contained in this document are based on sources we believe to be reliable. However, we cannot guarantee the reliability, completeness or correctness of these sources. All information and quoted rates are only up-to-date at the time of this publication and are subject to change at any time without notice. The content is based on numerous assumptions made by the Colin & Cie Group. It should be noted that different assumptions can lead to materially different results. The forecasts and assessments are only current at the time this publication is prepared and can change at any time without prior notice. Past performance of an investment is not a guarantee of future results. Certain investments can experience sudden and substantial losses in value. This information and views do not constitute a solicitation, offer or recommendation to buy or sell investment instruments or to carry out any other transactions. We recommend interested investors to consult their personal advisor before making decisions on the basis of this document so that personal investment goals, financial situation, individual needs and risk profile as well as further information can be duly taken into account as part of a comprehensive consultation. The information contained in this publication is marketing material that is distributed for advertising purposes only.
