Global focus remains firmly on the ongoing conflict in Iran, as the Aussie market has lagged behind global equities.
Fresh analysis from the team at Betashares has laid out the roadmap for a best and worst-case scenario this week.
Global equities trending up
International stocks rose further last week, reflecting hopes around US-Iran peace talks.
Global equity markets have now staged a three-week rebound on peace-talk hopes. The S&P 500 Index (SP: .INX) is now trading above the levels prevailing just before the Iran war began.
According to Betashares, US stocks fell the least during the initial sell-off and have so far rebounded the hardest, with the NASDAQ-100 Index (NASDAQ: NDX) ending last week 6.9% above its 27 February weekly close.
Interestingly, while the NASDAQ-100 and S&P 500 continued to rise, the S&P/ASX 200 Index (ASX: XJO) dipped 0.15% last week.
Betashares Chief Economist David Bassanese said in a release today that, in theory, a two-week ceasefire deal was supposed to have included a reopening of the Strait of Hormuz.
But within 24 hours of saying the Strait was open, Iran said it was closed again – due to the US' own blockade of Iranian-linked ships.
At the time of writing, there's news of the US seizing an Iranian ship, for which Iran has vowed retaliation. Iran has also denied US reports suggesting talks were set to resume.
Suffice to say confusion reigns supreme! If there's one guiding light for markets, it's the idea that the longer the war drags on and the higher oil prices go, the greater the political pressure on President Trump to cut a deal. In short, in TACO we trust – though patience is being tested.
The week ahead
Betashares commentary said this week we are facing a best and worst-case scenario.
- The worst-case scenario is Iranian attacks on US military ships, potentially even sinking one with casualties. That could spark an "all bets are off" resumption of US/Israel missile strikes, potentially including Iranian energy infrastructure, which in turn could spark Iranian attacks on energy and water infrastructure across the Middle East.
- The best-case scenario is no tit-for-tat ship attacks and an agreement to hold more talks.
It will be worth keeping track of technology shares here in Australia after a strong rebound last week.
At the time of writing, the S&P/ASX 200 Information Technology Index (ASX: XIJ) is up a further 1% today, after a massive rally last week.
How to target these sectors
For investors who expect the S&P 500 and/or NASDAQ-100 Index to keep rumbling ahead, there are several ASX ETFs that offer exposure:
- iShares S&P 500 ETF (ASX: IVV)
- Vanguard S&P 500 US Shares Index ETF (ASX: V500)
- BetaShares NASDAQ 100 ETF (ASX: NDQ)
Meanwhile, if you expect Aussie tech to keep rising, the Betashares S&P ASX Australian Technology ETF (ASX: ATEC) is worth considering.
The post Best and worst case scenarios this week for global equities: Expert appeared first on The Motley Fool Australia.
Motley Fool contributor Aaron Bell has positions in BetaShares Nasdaq 100 ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended BetaShares Nasdaq 100 ETF and iShares S&P 500 ETF and is short shares of BetaShares Nasdaq 100 ETF. The Motley Fool Australia has positions in and has recommended BetaShares Nasdaq 100 ETF. The Motley Fool Australia has recommended iShares S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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