Equity Strategy Amid Oil Volatility
Chart of the Week:
Oil Surge Supports Energy Near Term; Growth Stocks May Face Pressure
U.S. February CPI rose 2.4% YoY, with core CPI steady at 2.5%. However, following the U.S.–Iran conflict, oil prices have surged above $100. Higher energy costs are likely to pass through to transportation and logistics, potentially supporting CPI readings from March onward. If the Strait of Hormuz remains blocked, sustained high oil prices could exert stronger inflation pressure.
Major Recap 1:
Trump’s Mixed War Messaging Fails to Ease Market Concerns; Equities Mostly Lower
U.S. February nonfarm payrolls unexpectedly declined by 92k, down from January’s revised gain of 126k, signaling softer economic momentum. Meanwhile, the unresolved U.S.–Iran conflict and Iran’s effective blockade of the Strait of Hormuz have pushed oil prices back above $100 per barrel. Rising energy costs have revived inflation concerns and weakened expectations for Fed rate cuts, while geopolitical uncertainty has increased selling pressure in equities. Trump has claimed the war will end soon and that the U.S. has already secured victory, but also stated that military operations will continue. The inconsistent messaging has left markets unconvinced that the conflict will end quickly or that energy transport will normalize, leading global equities to shift from sharp initial losses into volatile trading, though declines still out number gains.
Major Recap 2:
Bond Markets Decline Broadly; Oil Holds Above $100, Stronger Dollar Weighs on Gold
Despite softer U.S. employment data and stableCPI, rising oil prices have renewed inflationconcerns, pushing back expectations for Fed ratecuts. Treasury yields have continued to climb,leading to broad declines in bond markets. Longer-duration investment-grade bonds have seen largerlosses, while high-yield bonds have also weakenedamid concerns over the economic outlook.
What’s Trending:
China Launches 15th FYP in 2026, Prioritizing High-Quality Growth and Domestic Demand
With the recent convening of China’s “Two Sessions,”the 15th Five-Year Plan officially begins in 2026.Authorities have set “high-quality growth” and“technological self-reliance” as core strategies for thenext five years, focusing on two main pillars. First,accelerating the development of “new productiveforces,” including strengthening the domestic AIsupply chain and emerging sectors such as the low-altitude economy. Second, boosting domestic demandthrough fiscal support to stimulate consumption andexpand effective investment, forming a virtuous cyclebetween investment and consumption.
In Focus 1:
Improving Economic Momentum and Foreign Inflows Support Japanese Equities
Recent data show continued wage growth in Japan. Nominal wages rose from 1.7% YoY to 2.4%, while real wages improved from -1.6% to -0.1%, indicating clear recovery in labor income, though real wage growth has yet to fully turn positive. Meanwhile, Japan’s spring wage negotiations have entered the main bargaining phase, with major unions demanding larger pay increases than last year, making the outcome a key market focus.
In Focus 2:
Ride Japan’s HALO Theme on Fiscal Expansion Policies
Following the election, Sanae Takaichi’s policy agenda focuses on three priorities: consumption, investment, and fiscal management. Key measures include suspending the food consumption tax for two years, expanding investment in AI and semiconductors, and controlling debt growth. Beyond AI, policy also emphasizes strengthening industrial capabilities in sectors such as semiconductors and shipbuilding.
