Mark LaMonica: Welcome to another edition of Morningstar Minute. I’m joined by Michael today. Michael, we need to start off with, of course, the Middle East. There’s still a lot of geopolitical news coming out of it. What are you guys doing?

Michael Malseed: Yeah, look, Mark, thanks. Certainly there’s just a lot of volatility day to day, and we still don’t have a resolution on the conflict. Is the strait open? Has it closed? It’s very much a day-to-day proposition, so we don’t have any insight on that. But I would say that the market’s view is that we’d be closer to the end of a resolution than at the beginning.

So they’re starting to take a more optimistic view on the outlook and the ramifications. It’s probably worthwhile looking at what some of the real-world impacts are going to be going forward, relative to what the market is now pricing in and the expectations if we move beyond the conflict.

Mark: And what are some of those things? If we look longer term, we look at some of the damage to the economy—what do you think about those ramifications?

Michael: Yeah, definitely. It’s just a fact that we’re seeing higher energy costs, and if there’s any continued disruption to the flow of energy globally, then there’s going to be inflationary pressure across a whole swathe of the economy. So it impacts inflation expectations, which in turn affects what central banks can do in terms of monetary policy.

You can see that the IMF last week downgraded their global growth forecasts—from around 3.3% in January down to 3.1% for 2026. So they’ve reined in those expectations. It’s still reasonably strong growth, but there’s probably some downside risk if there’s not a resolution fairly soon. You can see there is a real cost to the conflict that will be borne across economies globally.

Mark: And then any good signs? So that’s obviously all fairly negative—but anything more positive you’re seeing?

Michael: Well, we’re going into reporting season in the US, and there have already been some global results. For example, TSMC came out with their first quarter result last week, and that was very strong. They’re leveraged to the AI infrastructure theme, supplying critical chips to that industry, and their first quarter profit was up 58%.

So there’s still a very strong underlying AI theme, which is probably less exposed to geopolitical events. As we go into reporting season, particularly in US tech, we’ll get a better read on demand and broader economic activity.

We also saw a reasonably good GDP result out of China. That economy has been coming off a weaker base over the last few years, so that was a positive. I would caution, though, that some of these numbers are backward-looking—before the escalation involving Iran. What will be more telling is how higher energy costs flow through, and what management teams say in their outlook statements for the rest of the year.

Mark: So this is a challenging time for investors. You’ve talked about negative and positive signals, and there’s been a lot of volatility. Do you have a message for investors on how they should react in a market like this?

Michael: Yeah, our approach is fairly consistent through times like this. We’ve been through many market cycles, and it’s about staying calm, balanced, and measured. The key is maintaining diversification and a consistent investment approach, rather than reacting to short-term volatility.

The worst thing you can do is panic sell. If your portfolio is well-structured and diversified, it gives you confidence to ride out these cycles and stay invested. That’s what allows you to benefit from long-term compounding.

You can see even in the past month—if you sold at peak fear, you likely missed the sharp rally that followed. Missing those recoveries can significantly impact long-term returns. So the key message is: stay calm, stay diversified, and stay focused on the long term.