Since March, the global "stocks, bonds, and commodities" have been falling, "this is the worst situation, investors have nowhere to hide."

The energy shock triggered by the Iran war is pushing the global financial markets into a rare multiple asset synchronized collapse. Stocks, bonds, and gold are all falling in March, with traditional investment portfolios' defense tools almost completely failing, leaving investors facing the most severe hedging dilemma in recent years. According to the Financial Times, the MSCI Global Index tracking developed and emerging market stocks has fallen by about 9% in March. In the US, the S&P 500 index has fallen for the fifth consecutive week, setting a record for the longest consecutive fall since 2022. The Nasdaq 100 index has entered correction territory for the week. At the same time, the comprehensive index of global government bonds and corporate bonds has fallen by over 3%, with the traditional "60-40" stock and bond portfolio experiencing its worst monthly performance since September 2022. Gold also plummeted by 15% this month, as investors were forced to liquidate their previously profitable long positions under liquidity pressure. The core fear in the market is stagflation risk. Following the outbreak of the Middle East war, the sharp rise in energy prices has raised concerns about the global economy entering a stagflation situation with slowing growth and rising inflation, forcing central banks that had planned interest rate cuts to reconsider the possibility of raising rates, thereby simultaneously severely impacting the three major mainstream asset classes of stocks, bonds, and gold. "Nothing is effective": three major assets are under pressure simultaneously The rare aspect of this sell-off is that stocks, bonds, and gold are all falling simultaneously, rendering diversification strategies in multiple assets almost ineffective. In the stock market, the MSCI Global Index tracking developed and emerging market stocks has fallen by about 9% in March. In the US, the S&P 500 index has fallen for the fifth consecutive week, setting a record for the longest consecutive fall since 2022. The Nasdaq 100 index has entered correction territory for the week. In the bond market, the yield on the 10-year US Treasury bond has climbed to 4.48%, the highest level since July, while the 30-year yield is approaching 5%; European bond yields have also reached highs not seen since the outbreak of the conflict. The sell-off in bonds not only reflects the rising inflation expectations but also the revaluation of the policy paths of major central banks by the market. The collapse of gold has caught the market off guard. After two years of strong growth, gold peaked in January this year, but has already plunged by 15% this month. Sophie Huynh, a multi-asset portfolio manager at BNP Paribas Asset Management, points out that because there is "nowhere to hide," investors are "liquidating high-yielding assets like gold" to meet liquidity needs. Raphael Thuin, Capital Markets Strategy Director at Tikehau Capital, said, "What is effective for investors? Nothing is. This is really one of the worst scenarios you can think of. Managing portfolios in the past few weeks has been extremely challenging." Trump's statement failed to stop the bleeding, cracks appear in market trust Trump extended the deadline for striking Iranian energy infrastructure, but this statement failed to calm investor sentiment. The S&P 500 index fell by 1.7% on Friday, continuing the decline from the previous trading day (the worst single day since the outbreak of the conflict), with a two-day decline not seen since the tariff turmoil last year. Jordan Rochester, Head of Fixed Income Strategy at Mizuho, said Trump's deadline extension "does not solve the accumulating problem of the blockade in the Strait of Hormuz," and "the market may begin to pay less attention to verbal pressure from the White House and focus more on the reality of energy shortages in the field." US Secretary of State Marco Rubio predicted that the war would end "in weeks, not months," but the market barely reacted to this. Larry Weiss, Head of Stock Trading at Instinet, said, "News like this a few weeks ago would have pushed the market soaring, but today there is no reaction. No one knows how the next step will unfold, and there is inherent distrust in the statements from both the US government and Iran." Steve Chiavarone, Deputy Chief Investment Officer for Stocks at Federated Hermes, also pointed out, "Trump had previously stabilized the oil market and bond market with words, with the market waiting for the conflict to end, but today the market no longer responds to this." Defense tools fail, diversification logic challenged This crisis is not only a market pullback but also a serious question of the multi-asset diversification investment framework of the past decades. Michael Purves, Founder of Tallbacken Capital Advisors, explained in a report to clients that an investor who had perfect foresight on February 27 (a day before the conflict broke out), if they had bought bonds, gold, VIX call options, and S&P 500 protective options in advance, would now be in a loss position in almost all positions. Research by Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence, shows that in trading days when stocks fell this year, the probability of bonds and gold rising simultaneously was only about 43%, lower than the over 60% level ten years ago and even lower for Bitcoin at about 25%. Christian Mueller-Glissmann, Head of Asset Allocation Strategy at Goldman Sachs, pointed out that in the early stages of inflation shock, the "only effective" tools are derivatives that bet on rising inflation or commodity prices. His team shifted to overweight cash a week after the conflict broke out. The latest Bank of America fund manager survey shows that investors poured into cash at the fastest rate since the outbreak of the COVID-19 pandemic in March. Old scripts fail, markets await turning points Despite the severity of the current situation, some market participants believe that the sustainability of this trend depends on the course of the conflict. Michael Arone, Chief Investment Strategist at State Street Global Advisors, believes that the failure of diversification in fixed income may be temporary. His team recently reduced equity exposure, increased bond holdings, and expects that once tensions between the US and Iran begin to ease, the risk of inflation will diminish, leading the bond market back to the logic of rate cuts. However, Mina Krishnan, from Schroders Global, warned that the market environment has undergone a deeper structural shift: "The world has shifted from demand side shocks to supply side shocks, and old investment scripts need to be revised." Her team had purchased protection through credit default swaps before the outbreak of the Middle East conflict and continues to hold onto them. Raphael Thuin of Tikehau Capital pointed out the core contradiction: "The traditional concept of safe-haven assets is increasingly being challenged. The constantly evolving dynamics of the global economy and financial markets have made this narrative complex." Source: Wall Street View, Author: Yang Chen, Edited by GMTEight: Chen Qiuda