The current conflict in the Middle East escalated recently and, while there aren’t any immediate expectations of the situation worsening, geopolitical tensions are unlikely to subside in the coming months.

Fahad Kamal, Chief Investment Officer, Coutts, said: “The events taking place in the Middle East since the end of last year have been devastating. While tensions are still unfolding, we continue to uphold our fiduciary duty to our clients to monitor the impact on markets.”

How Coutts is managing the Royal Bank Invest funds

For the past six months, the Coutts team has closely monitored the ongoing geopolitical risks and the potential impact they could have on investment markets.

The market’s reaction to the recent air strikes in the Middle East was kept to a minimum with no significant volatility experienced at the time of writing. But should the situation worsen, stock markets could see larger movements.

Coutts has positioned its investments more broadly for the current, overall market landscape. For example, the team holds more US stocks than its benchmark as America’s economy has shown resilience for some time. And it has a position in high yield corporate bonds, which tend to perform well when the economy expands and have been supported by interest rates peaking.

Fahad says: “While there may be some reactive movements to equity markets in the short term, we stay true to our disciplined philosophy and framework as long-term investors. We’re focused on making the most of positive market moves and seizing opportunities, but also being well-positioned should markets temporarily drop.”

Previous geopolitical tensions show markets tend to bounce back

It’s very normal to see some volatility in markets in the days following geopolitical flashpoints.

Previous similar events on the S&P 500 index – the 500 largest companies in the US – show that 5-10% selloffs can occur as a result.

But markets have on average recovered with double-digit returns over the following 12 months.


Past performance should not be taken as a guide to future performance. The value of investments, and the income you get from them, can fall as well as rise and you may not get back what you put in. You should continue to hold cash for your short-term needs.

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