【Founder’s Article】 Geopolitical triggers have accelerated valuation adjustments, and the key timing has now been revealed!

This content will also be published in the April Investment Monthly Report〈Founder’s Note〉on 2026.03.27

Dear all,

In the March monthly report introduction, we pointed out that** oil prices will become the key factor affecting liquidity conditions and the level of holdings**, and we cautioned that when WTI crude oil prices rise above 70 USD per barrel, it may lead to “the Federal Reserve delaying rate cuts, a higher chance of a market pullback, and the need to reduce positions.” Then the conflict between the U.S. and Iran escalated, oil prices surged quickly: WTI West Texas Intermediate crude rose 35.9%, while gold was hit by the impact of rising real yields, falling -13.7%. And as the U.S.-Iran war continued to intensify, stocks, FX, bonds, and gold all experienced a broad sell-off in March. The U.S. Dollar Index rose, and risk-on capital fled across the board—valuation adjustments arrived ahead of schedule.

Note: 2/28 and 3/1 were holidays, so the统计 period was moved to the most recent trading day for calculation.

If you want to gain a deeper understanding of how we view each period, besides the reports, our research team will be with you this year through quarterly outlooks and theme sharing. On 3/31, Ralice will kick things off, sharing how assets are being repriced amid escalating geopolitical conflict and rising AI concerns—welcome to join!

I. The current market reaction remains at valuation adjustments; it has not yet reflected a fundamental shock

Since February, we have observed that regardless of 13F filings, large trader positioning, or ETF fund flows, you can see capital moving toward “energy sector stocks” in a concentrated manner. At the same time, parts of “inflation data” have been stirring. In the ISM Manufacturing subcomponents released on 3/2, the most critical “raw material prices index” jumped sharply from the 50s to 70.5, with nearly all purchasing managers reporting higher prices. On 3/18, ahead of the Federal Reserve meeting, the PPI (producer price index) was also released, rising for the third consecutive month on a month-over-month basis, which led to declines in U.S. equities. Notably, the impact of the U.S.-Iran conflict has not yet been fully incorporated into the above data, further deepening market worries that inflation pressure will heat up in the future.

Changes in inflation expectations have also quickly transmitted into the interest-rate market. Although the Federal Reserve emphasized multiple times in the meeting that “we are still observing and uncertainty is high,” the market has already clearly been dialing down the probability of rate cuts this year, and has even begun pricing in expectations that the European, UK, and Canadian central banks will turn toward rate hikes.

Based on what we see now, the market is starting to move in a direction similar to the early stage of the Russia-Ukraine conflict, with corrections mainly centered on valuation adjustments related to “inflation” and “interest rates.” However, as of now, we still have not seen further reflection at the level of corporate earnings in the fundamental layer, indicating that the current market is still setting the tone for this round of shocks as a “short-term event.” The IEA has also released strategic oil reserves rapidly, keeping the real supply gap at about 3% to 5%, and expecting the impact period to fall within roughly one quarter.

II. Is there a “double knockout” like Davis, completing the correction of inflation > interest rates > economic fundamentals?

As for whether this will evolve into a Davis “double knockout” where “valuation” and “fundamentals” are corrected in tandem, we still believe that compared with the Russia-Ukraine war, the current situation is relatively protective.,

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