The outlook for shares and other investments is always uncertain. It’s just that at present it seems much more uncertain than usual.

The Middle East conflict drags on. The Strait of Hormuz remains closed, so the world’s supply of oil, gas and fertilizer is sharply reduced. There doesn’t seem to be a resolution close.

The much higher oil prices are painful at the pump, but worse, they are having the flow on effect of raising the prices of most other things due to fuel being essential to their production and supply. That is adding to the inflation we already had from excessive Government spending.

Australian interest rates have now been raised three times, with more likely. Rates are also likely to rise in the UK and Europe soon, and in the US in time. That’s bad for share and property prices.

There is more geopolitical risk now. The Trump administration’s changes to the established way of doing things run the risk of destabilising the global order. This is reducing interdependence between countries and encouraging independence, which is less efficient.

Wars are terrible for humanity, tragic. However history shows they usually correspond with rising share markets. The outbreaks of the World Wars in 1914 and 1939 initially saw a sharp drop in prices, but thereafter rises. Increased spending on military equipment no doubt helped. 

In the US, March Quarter company profits have been much better than expected. Over eighty per cent of companies have exceeded analysts’ forecasts. The AI revolution is raising productivity and reducing costs.

Companies are being affected differently by the range of negative and positive influences. Defence technology and equipment companies are benefiting from extra defence spending. Data centre builders and microchip manufacturers are booming. Travel and leisure companies are suffering.

Locally focused companies that neither import nor export are safer. Mining companies are up on expected strong demand ahead for manufacturing inputs. Share market listed property companies have nosedived due to interest rate rises making their rental yields less attractive.  

The smartest approach now is to diversify. Have a mix of investments, not only within shares, but also other sectors – property, infrastructure, cash and fixed interest, both in Australia and overseas.

Diversifying means some money will always be in safer, less affected areas when things aren’t good. Managed funds are a great way to diversify.

For long term investors holding cash, this is a buying opportunity. Five plus years from now markets will be well ahead of current levels.