The Iran war is “the greatest global energy security threat in history”, according to the head of the International Energy Agency. The US tariff rate is at its highest level since the early 1940s, and could rise further. President Donald Trump’s caprice shows no sign of letting up. And yet, after a powerful rally, the S&P 500 has hit a new record.
Stockpickers have not entirely ignored Trump’s protectionist agenda or the Middle East conflict. But much like investors use earnings before interest, taxes, depreciation and amortisation (ebitda) to focus on the core value of a business, the market as a whole appears to be trading on another adjustment. Call it Earnings Before Iran, Tariffs and Dubious Announcements. What explains this?
First, it is never easy to price uncertainty. But between ever-changing tariff rates, evolving war scenarios and Trump’s Truth Social feed, it is harder than usual to separate signal from noise.