Global financial markets navigated a range of influences during February, with risk assets generally advancing amid stronger economic data and improved corporate earnings. Sentiment was also supported by the US Supreme Court’s decision to strike down several tariffs introduced by US President Donald Trump, which investors interpreted as reducing uncertainty around global trade.
In Japan, equity markets reacted positively to the snap election victory of Prime Minister Sanae Takaichi. Expectations of further fiscal stimulus helped drive Japanese equities to new highs. Alongside strong performance across Asia, European and UK markets also contributed positively to portfolio returns, benefiting from more diversified market structures and a rotation away from the most concentrated areas of the US equity market.
More recently, escalating tensions between the US and Iran have become the dominant driver of investor sentiment. We are mindful of both the economic and humanitarian implications of the conflict as it now enters its sixth day. At present, we believe portfolio positioning remains appropriate and no immediate changes are required. We will continue to monitor developments closely while maintaining a disciplined approach to managing both risks and opportunities.
Geopolitical Tensions Rise in the Middle East
On 28th February, the US and Israel launched air strikes on Iran following several weeks of rising tensions and multiple rounds of negotiations regarding Iran’s nuclear programme. As expected, energy markets have been the most sensitive to these developments, with oil and gas prices rising sharply as markets assess the risk of disruption to global supply routes.
In particular, the Strait of Hormuz remains a critical chokepoint for global energy shipments, and markets are currently pricing in a meaningful probability of ongoing disruption. While the US has pledged to provide security escorts for shipping in the region, this has so far done little to ease investor concerns. As a result, there has been a noticeable divergence in performance between energy-importing economies and those that are major energy exporters.
From a portfolio perspective, recent market volatility has created some short-term headwinds as investors adjust to the potential for higher energy prices and supply disruptions. However, we believe the portfolios remain well positioned to navigate this short-term turbulence.
Elevated cash levels within the tactical OBI portfolios provide a buffer against further volatility, while allocations to commodities and real assets offer diversification and a natural hedge against further escalation. Investors following the House Strategy also maintain a 25% allocation to the Ultra Cautious portfolio, which is designed to deliver income and capital protection during periods of heightened uncertainty.
At the time of writing, we believe the conflict is likely to result in only a short-term spike in energy prices, limiting the broader impact on global inflation and interest rate expectations. As such, we remain comfortable with current portfolio positioning, while the cash held within the OBI Volatility Managed portfolios provides flexibility to take advantage of opportunities should market dislocations arise. We continue to monitor developments closely and will communicate any portfolio changes should the outlook evolve.
US Tariff Uncertainty
In a blow to President Trump’s agenda, the US Supreme Court struck down the sweeping global tariffs announced in April 2025. The decision invalidated the so-called ‘Liberation Day’ levies imposed on many of the United States’ trading partners and raised questions around whether importers may ultimately be entitled to refunds.
The ruling also weakened one of the administration’s key negotiating tools and was welcomed by investors, who viewed the removal of tariffs as a positive development for corporate profitability and global economic growth. Equity markets responded favourably as uncertainty surrounding international trade policy appeared to ease.
The longer-term outlook remains less clear. President Trump responded defiantly to the ruling and signalled his intention to pursue alternative mechanisms to impose trade levies and maintain import-related revenues. Treasury Secretary Scott Bessent also suggested that a revised tariff framework could be introduced in the near term.
While the Supreme Court’s decision was broadly positive for risk assets, we expect trade policy to remain an important source of market uncertainty. As a result, we do not believe the ruling materially changes our broader outlook for either the US or the global economy at this stage.
Election Delivers Boost to Japanese Equities
In early February, Prime Minister Sanae Takaichi secured a historic election victory as the ruling Liberal Democratic Party achieved its strongest result in the snap election. The outcome prompted investors to increase expectations for further fiscal support aimed at boosting economic growth and helping households manage rising living costs.
The resulting parliamentary supermajority is expected to make it easier for the government to implement policy measures, with markets anticipating increased public spending and investment alongside a potentially slower pace of interest rate increases from the Bank of Japan.
Following an exceptionally strong year for Japanese equities in 2025, supported by corporate reform, improving economic growth and rising wages, the prospect of additional fiscal stimulus has further strengthened investor sentiment. Japanese equity exposure across the OCM portfolio range remained a significant contributor to performance throughout February, continuing to outperform many developed market peers.
Performance and Portfolio Positioning
Over what has been a turbulent year to date, portfolio diversification has once again proved crucial in navigating a rapidly shifting macroeconomic backdrop. During February, investors were rewarded for maintaining exposure to Asian and Emerging Market equities alongside selective allocations to the UK and Europe.
Developments in the Middle East contributed positively to our natural resources and precious metals exposures, while increasing caution towards economies that are heavily reliant on imported energy. The rotation away from some of the largest US technology companies also supported the relative performance of portfolios with broader geographic diversification.
Overall, we remain confident in the positioning across the OCM portfolio range and continue to monitor global developments closely. Elevated cash levels within the OBI Volatility Managed portfolios provide both protection against further market volatility and the flexibility to deploy capital should attractive opportunities arise.
With higher energy prices contributing to rising inflation expectations, fixed income assets have provided less protection in recent weeks than investors might typically expect. As a result, we continue to favour cash and money market funds within both the OBI and House Strategy allocations as a source of stability and downside protection.
At this stage, we do not expect higher energy prices to materially alter the longer-term inflation outlook. Our view remains that central banks in both the US and the UK are likely to continue gradually reducing interest rates over the coming quarters.
Given the speed with which market sentiment can shift, we are not currently making short-term adjustments to portfolio positioning. However, we will continue to monitor developments carefully and will communicate any changes should the outlook evolve.
Past performance cannot be used as a guide to future performance and the value of your investment will fall as well as rise in value. You may not get back all your investment and the final value of your investment will depend on the performance of your portfolio. The actual performance of an individual client’s portfolio may differ due to different funds being used and being restricted in relation to certain asset allocations. Performance figures quoted include fund manager charges but exclude adviser, discretionary, custodian and switch charges. Unless stated, income is reinvested into the portfolio. The information contained in in this document is for information purposes only. It does not constitute advice or a recommendation or an offer or solicitation for investment. OCM Wealth Management Limited is authorised and regulated by the Financial Conduct Authority (FCA Registration No: 418826) OCM Asset Management is a trading name of OCM Wealth Management Limited
