Sim: Welcome back to Morningstar Minute, where we discuss everything that’s happened in markets. Today, I’m joined by Bianca to discuss the past week in markets. Bianca, Iran is still very much a focus right now. What are we seeing there?

Bianca: We continue to see obviously the markets focus on Iran and the back and forth. And we’re seeing a wave of mixed messaging. What we’ve seen is conflicting announcements coming out from the US government versus Iran—and, you know, will it or won’t it end soon. I think the market is really looking for de-escalation.

While it probably looks like it’s going to continue for a bit longer than what the market had hoped.

Sim: So have markets been reacting?

Bianca: Yes. The markets have obviously been seesawing back and forth, whether it be equity markets or bond markets. What we’ve seen—a little bit of a reversal of what we saw over the last month—was that the energy sector was probably the only global equity sector down for the week, while everything else was in a relief rally on hopes that the war would de-escalate.

In terms of bond yields, we saw Australian bond yields start the week about 5%. They edged below towards 4.9 and then ended the week back up above 5%, just on these gyrations of whether Iran will kind of end soon or not.

Sim: And the Aussie healthcare sector came under quite a bit of pressure last week, and that was after a tariff announcement out of the US. What’s been happening there?

Bianca: The US on about Thursday last week announced 100% tariffs on Australian pharmaceuticals, which sounds like a lot if you compare it to the UK, South Korea and Japan, where they’ve done deals of around 15% tariffs.

For us, obviously the big heavyweight in our pharmaceuticals area is CSL (ASX:CSL). They will probably likely be exempt though from this due to a number of things. So there are some caveats to the 100% tariffs—and that is for plasma products, which CSL manages.

The other part that is kind of maybe a plus for CSL as well is that it has drug production and manufacturing in the US. So again, it may get a better deal than this 100% tariff headline.

Sim: And amid all this volatility, how is the investment team positioning right now? Are there any sort of pockets of opportunity that you guys are looking at?

Bianca: Throughout this year—and this continues to be the case—we’re looking at consumer cyclicals. So obviously those stocks that have been quite hard hit by cost-of-living pressures.

Now with what’s been happening with the Iran war, obviously that’s hitting inflation in terms of oil price rises. Cost-of-living pressures are heavily in focus. We’re definitely seeing that in Australia and throughout Asia, where supply shortages are being really felt.

So for us, it’s leaning a little bit more into those consumer cyclical stocks. Also healthcare has been another area. We mentioned deregulatory developments—well, they continue to be quite negative for pharma stocks and the like. So those are the areas where we’re just using price to kind of edge in.

Sim: With all the uncertainty of the market, how are you getting through it?

Bianca: So for us as investors, I think volatility is just part of investing. We aren’t able to predict exactly when this will end, how long it will last, or how it will end.

But what we can do is control the things that are in our control—and that is primarily valuation and price. So as things get cheaper, we tend to use that.

We also use time frame as our friend. We don’t predict what’s going to happen in the next 12 months, but we can probably say over the medium term that things will change. That’s the ever-changing nature of markets.

So we use time frame, we try to look through the short-term volatility, and we use price—along with a valuation buffer—as our guide.