Sibori Asset Management: A decline in short-term interest rates may benefit the stock market and trigger a rebound in the bond market

According to the information obtained by Zhitong Finance APP, Siborui Investment Management stated that based on the initial market response, the Israel-Hamas conflict has caused the greatest volatility in the energy market, especially in the oil market. It is believed that Iran has a strong motivation to avoid large-scale war to ensure oil exports in the Persian Gulf, thus the overall global impact will still be relatively low. A de-escalation of the situation in the Middle East may lead to a decline in energy prices (including oil and liquefied natural gas), and lower energy prices help curb inflation, which may prompt the Federal Reserve to reconsider interest rate cuts this summer. Additionally, stable or declining energy prices would allow the European Central Bank to maintain its rate-cutting cycle. A decrease in short-term interest rates may help global stock markets remain stable or even surge to historical highs, triggering a new round of bond market rebounds. However, if the conflict in Iran escalates again, the market environment may face greater challenges: a sharp rise in energy prices, global inflation levels possibly remaining high, the Federal Reserve extending its high short-term interest rate policy in the U.S., and weak performance in both the stock and fixed income markets. If the conflict escalates, energy and defense stocks may become safe-haven sectors to hedge against other categories that may be under pressure. As investors continue to digest news related to the conflict, the U.S. stock market remains robust. Recently, oil price volatility has intensified, coupled with market concerns about escalating tensions, providing some support for defense concept stocks. However, the market has yet to reflect the risks of a prolonged conflict. Rising commodity prices may push up operating costs across multiple industries, leading to short-term profit margin pressures, and historically, investors have been highly sensitive to such situations during conflicts. After the bombing incident, emerging markets have performed relatively calmly, mainly due to stable oil prices and the U.S. dollar, both of which have traditionally been key factors influencing the performance of emerging market stocks. If the situation can be resolved quickly, Middle Eastern stock markets may benefit from an upward trend. Attention should also be paid to China's stance, which remains restrained for now, but if a tougher posture is adopted, it may further exacerbate U.S.-China tensions. From a long-term perspective, monitoring China's policy direction towards Taiwan is crucial. This attack may serve as a deterrent for short-term actions, but if the situation in the Middle East continues to deteriorate, it may allow China to adjust its action strategy while the U.S. focuses on the Middle East situation. Currently, the market maintains a cautiously optimistic outlook, as the main drivers pushing emerging market performance in 2025 still exist. In an uncertain market environment, bonds provide relatively stable protection. Overall, Siborui Investment Management's investment portfolio has been prepared for economic slowdown and the normalization of the yield curve. It is expected that interest rate volatility will decrease in the coming weeks or months, and inflation will stabilize as the impact of tariffs is gradually digested. There may be attractive relative value investment opportunities in the securitized products market (especially in the transfer securities of mortgage loan receivables). Corporate bond credit spreads are narrow, but with careful selection, it is still possible to discover corporate securities with good credit ratings and reasonable valuations. Additionally, a weaker U.S. dollar also brings opportunities to the global bond market, especially for non-dollar bonds used to hedge against the dollar