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Chapter 1: What is the main topic discussed in this episode?
On Point with Craig's Investment Partners. The information provided here is general in nature and it's not financial advice. It doesn't take into account your situation, objectives, goals or risk tolerance. All investments are subject to risks and none are guaranteed. Before you make any investment decisions, we recommend you contact an investment advisor.
For more information about our services or to view the Craig's Investment Partners financial advice provider disclosure statement, please visit our website, which is craigsip.com. Welcome to On Point.
I'm Mark Lister, Investment Director at Craig's Investment Partners, and I'll be talking about a range of topics including economics, portfolio strategy, investor education, and anything else that's happening out there in financial markets.
With the war between the US and Iran now entering its seventh week, we are close to an important crossroads for markets. In the last several days alone, we've had a ceasefire agreement, the highest level diplomatic meetings between the two nations since the 1979 Iranian revolution, and US moves to blockade the Strait of Hormuz after talks initially failed.
The situation remains serious and extremely fragile, while oil has spent much of the past week above US$100 a barrel. With some 10-15% of global oil production trapped, it is not an exaggeration to say that this is creating the largest supply disruption in the history of the oil market. We're already seeing the impact of this across the global economy.
The US inflation rate jumped to a two-year high last month, while consumer sentiment has plummeted to the lowest level ever in the University of Michigan survey, and that's been around for 74 years. Here in New Zealand, the Reserve Bank has suggested our inflation rate could hit 4.2% in the June quarter, which would be well above previous expectations.
The Reserve Bank is keeping its options open, but if the oil price spike turns into broader inflation, it will have little choice but to increase the OCR. Local financial markets have already moved to expect three hikes this year, starting in July and taking the OCR to 3% by Christmas. that's well above 2.25% today. It's not a given, but that is certainly possible.
We will be watching wage growth and wage demands closely, as well as price setting behavior from firms. With all of that in mind, share markets around the world haven't reacted nearly as badly as some might have expected. And if you'd looked at your KiwiSaver balance at the start of the year and then ignored it until today, you would probably think that we've had a fairly dull few months.
Yes, it's been volatile at times. The S&P 500 index in the US was down 9.1% from its peak at its lowest point. However, it has rebounded strongly and it's now just 1.3% below its all-time high from February. World shares overall are still up in 2026, while US Treasury bonds as well as New Zealand corporate bonds are essentially flat.
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Chapter 2: What recent events have led to a crucial crossroads for markets?
He might be more attuned to the growth side of the Fed's mandate and a little more inclined to reduce interest rates in the face of economic weakness. For those picking that this will all blow over soon, bonds and fixed income might look interesting at these levels. Stepping back, we could be in for more volatility over the near term as the standoff continues, so we should prepare for that.
If tensions ease and oil prices fall, the sharp rebound from early April will be back on and patient share investors will be well rewarded. If the disruption persists and inflation forces some central banks to tighten monetary policy into a weaker economy, then we're looking at something quite a bit uglier. It's difficult to know which of those paths we're on.
However, the lack of panic in financial markets does suggest it's the one we're all hoping for. It's still very uncomfortable, though, to be faced with two distinct outcomes and little middle ground on offer. Thanks for listening, team. We'll talk again soon. Enjoy your week.