Franklin Templeton analyses market contradictions

Mike Taylor

Managing Editor and Publisher

30 April 2026

Markets appear to be defying the uncertainties generated by the continuing conflict in the Middle East because investors have been conditioned not to over-react, according to Franklin Templeton Chief Market Strategist, Stephen Dover.

In an analysis released today, Dover reflects on the fact of high oil prices and the continued closure of the Strait of Hormuz but notes that over the past few weeks global equity markets have rebounded sharply, overcoming their war-related setbacks in March.

“Credit spreads, the euro and other asset prices have also snapped back. Markets appear to be shrugging their collective shoulders,” Dover’s analysis said.

“What’s going on? Are markets complacent with the risks identified by our clients and our group CIOs? Or are there fundamental reasons behind the markets’ recoveries?” he asks.

Dover said that while the world economy and financial markets find themselves in a tenuous position amid the status quo of restricted supplies of energy and petro-products there are positives.

“…we believe the incoming fundamentals remain strong and above all, the health of corporate profits. And in the United States at least, economic growth momentum remains intact, in our analysis. Lastly, investors have been conditioned to not overreact, a behaviour which dampens volatility.

“But all that only describes a near-term stalemate of competing forces. Sustained market stability can only arrive via a durable resolution of the conflict, one that permits a credible and lasting reopening of one of the world’s most vital waterways. Until that happens, investors should not be complacent about risk, and particularly not today as the US equity market flirts with fresh all-time highs.

“Overall, our investment strategy remains intact. The cornerstone is a broadening of opportunity, underpinned by strong earnings growth in the United States and emerging equity markets, coupled with long-term returns via durable capital expenditures in global energy infrastructure and national defense/security.

“Within fixed income markets, we remain cautious on duration with a preference for coupon-based income in high yield.

“Finally, a combination of high real yields in Brazil, sound fiscal fundamentals in Asia and a stable-to-weaker US dollar supports our commitment to local currency emerging market debt.”