Climbing the Wall of Worry: Rally Despite Iran Crisis
Financial markets staged an impressive recovery in April following the sharp correction in March triggered by the geopolitical escalation in Iran. In several regions, equities even reached new all-time highs. What is particularly striking is that analysts have revised corporate earnings expectations upward despite ongoing geopolitical uncertainties and persistent inflation concerns. How can this apparent disconnect be explained?
The concept of “climbing the wall of worry” captures this phenomenon well: markets often advance despite prevailing skepticism. The recent rebound is supported by several factors. First, de-escalation measures in the Iran conflict have eased market panic. Second, resilient economic data and supportive fiscal measures continue to underpin growth. Third, upward revisions to earnings forecasts reflect confidence in corporate earnings resilience.
An inflationary environment is not inherently negative for all sectors. Technology and AI-related business models, in particular, benefit from structural tailwinds and show limited sensitivity to short-term geopolitical shocks. Although some sectors are showing weakness due to the energy crisis during the current reporting season, the outlook for many companies is overall proving more constructive than feared.
This development follows a familiar pattern: markets do not rise despite uncertainty, but rather through a gradual repricing of it. As long as worst-case scenarios are avoided and fundamental data remains stable, risks are incrementally discounted, allowing markets to climb the wall of worry.
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Kind regards,
Gzim Hasani, CEO
Bekim Laski, CFA, Chief Investment Officer
