Fasten your seatbelts, markets often punish assets that matter before they reward them

I’m currently teaching my youngest son how to drive. One of the most important lessons, especially at high speed, is that you don’t stare over the hood at the road right in front of the car. It’s disorienting, it’s frightening and it dramatically increases the odds of a dangerous mistake. Instead, you need to focus on where you’re headed and the path in front of you will take care of itself.

Looking over the market’s hood this past month, there’s plenty to feel uneasy about. A supply‑driven oil shock has triggered a meaningful selloff from the February and early March highs across several parts of the market: long‑duration bonds and equities, gold, copper and their associated producers. The volatility is real, and it’s making for one heck of a bumpy ride.

That unease has been compounded by a number of factors, primarily around the ongoing situation in Iran and the resulting disruptions in the Strait of Hormuz, affecting not just oil and natural gas but sulfur, helium and a wide array of petrochemicals. This supply shock is not your typical inflation but more so risks being extremely deflationary in nature as consumers are hurt by higher gasoline prices and other feedstock costs such as fertilizer, ultimately reducing discretionary spending.

The U.S. Federal Reserve certainly helped in this regard last week with its hawkish policy stance aimed mainly at controlling inflation. I think they are making the mistake of staring over the hood and completely misreading the nature of the shock taking place, which could have broader economic implications down the road. Should this continue, we will see the classic stagflation setup and, if mishandled, a potential deep global recession.

It isn’t a surprise that markets are responding in predictable fashion. A stronger U.S. dollar, higher real interest rates, and broad positioning clean‑ups, effectively an across‑the‑board reduction in risk exposure, have also weighed heavily on real‑asset equities in the short term. These assets are particularly sensitive to tighter financial conditions and currency strength. That said, the long‑term fundamentals have not suddenly deteriorated unless central banks continue to misread an increasingly fragile and uncertain geopolitical backdrop in the Middle East.

In fact, the forces driving today’s volatility are the same forces that underpin the longer‑term case for hard assets. Energy insecurity, geopolitical stress and the accelerating global artificial intelligence (AI) build‑out are not cyclical side stories that will suddenly disappear. The global AI battle between America and China is still very much in play, which means a race to support energy‑intensive, materials‑intensive re‑industrialization with reliable power, resilient supply chains and secure access to critical minerals. The situation in Iran doesn’t mean an end to the data centre buildout and with it the vast amounts of electricity, copper, uranium, natural gas and grid infrastructure that come with it.

Winning the AI race is as much about who controls these and perhaps it’s going to be that much harder to do with the drawdown of inventories during this crisis. At the same time, capital providers, particularly in the Middle East, need confidence in geopolitical stability before recommitting to large‑scale AI investment.

The bottom line is this: Volatility is not the same as being wrong about investments. In periods marked by supply shocks and policy misalignment, markets often punish the assets that ultimately matter before they reward them. This is where discipline, position sizing, and time horizon matter most. And if you focus on the direction we’re headed rather than staring over the hood there are real opportunities beginning to emerge.