Geopolitical Risks: Iran, Hormuz and Energy
Key Questions
What does the Shiller P/E approaching dot-com levels imply?
It serves as a stark warning for long-term investors about elevated market valuations. Berkshire Hathaway's $397 billion cash pile further suggests few bargains remain.
What do 125 years of market data reveal about return assumptions?
The data challenges the common 8% equity return assumption and shows that factors can underperform for decades. This reinforces caution around current valuations.
How has equal-weighting performed versus market-cap weighting recently?
Equal-weight strategies like RSP have underperformed SPY with higher volatility, cautioning against relying on simple diversification in overvalued markets. SCHD's outperformance highlights value rotation but does not resolve broader overvaluation concerns.
Iran-related escalation and possible Strait of Hormuz disruption remain central risks through oil, inflation expectations, Treasury yields, and volatility. Recent articles add no confirmation of shipping disruption or reported US strikes on Iranian oil tankers; those claims should remain unverified.