Daily: Strengthen portfolio defenses as volatility rises

Key arguments

• Geopolitical shocks are rarely sufficient reason to stop investing: since 1941 the S&P 500 was higher 12 months after a crisis began about three-quarters of the time.
• The global energy system is adapting: OPEC output rose 0.92 mb/d in September to 25.1 million, about 85% of February's level, and G7 emergency stock releases offer temporary relief.
• Base case: gradual recovery of energy flows and production should let oil prices moderate next year, with higher energy costs insufficient to derail global growth.
• Broad commodities, fixed income and select alternatives can strengthen portfolio resilience; commodities have historically low correlation with traditional assets.

Corresponding source evidence

1. Brent crude oil hit USD 112/bbl for the first time since May and is on track for a third consecutive week of price gains as fresh attacks in the Middle East have heightened concerns about further disruptions to energy supplies.
2. Trade routes are also shifting, while the G7 decision to release additional emergency oil stocks should provide some temporary relief.
3. We acknowledge that the physical oil market remains tight and is vulnerable to further supply shocks, but our base case is that a gradual recovery of energy flows and production should allow oil prices to moderate into next year. · next year