Emmanuel Co, Head of European Equity Strategy at Barclays, believes investors should brace for continued Middle East tensions but should not make major portfolio changes based solely on geopolitical headlines, as corporate earnings growth remains the key driver of market direction.
According to Co, markets should avoid overreacting to news headlines. Although tensions between the United States and Iran have escalated again, causing European equities to retreat from recent highs, markets found more stability on Thursday.
Co views the recent market correction following past gains as natural, noting that even oil prices had likely fallen "too far, too fast." He warned that market volatility will likely persist through the summer as tensions with Iran show no signs of immediate resolution. However, the potential for de-escalation would prevent a sustained oil price surge.
Co advises investors to avoid making significant portfolio shifts in response to Middle East developments, diversify away from heavy tech exposure, and focus on companies benefiting from increased capital investment. He emphasizes that corporate profit growth will be the primary market driver in the second half of the year.