This podcast isn’t personal advice. If you’re not sure what’s right for you, seek advice. Tax rules can change and benefits depend on personal circumstances.
Volatility is something we have come to anticipate as par for the course under a Trump presidency. In most cases, the sensible investment strategy is to sit tight and stick to your plan. Well diversified portfolios, with exposure to different asset classes, geographies and styles will provide the best defence against uncertainty.
They also reflect on this week’s Spring Statement - and why the markets viewed it as a non-event.
This podcast was recorded on March 4 2026 and all information was correct at the time of recording.
Nothing in this podcast is personal advice – you should seek advice if you’re unsure what’s right for you. Investments rise and fall in value, so you could get back less than you invest. And past performance is not a guide to the future.
[0:05] Emma Wall: Hello and welcome to the Switch Your Money On podcast from Hargreaves Lansdown. I’m Emma Wall – Chief Investment Strategist.
[0:10] Matt Britzman: And I’m Matt Britzman – Senior Equity Analyst.
This is your Investment Special, and we’ve got a lot of ground to cover following the events in the Middle East over recent days – plus we also had the Spring Statement.
[0:23] Emma Wall: Yeah – let’s jump straight into what’s going on in the Middle East, because it’s been dominating headlines and dominating the markets. I mean, the first thing to say is, obviously, this is a podcast about investment – we are very aware of the humanitarian impact of what’s going on in the Middle East and our thoughts are with anybody who is impacted.
[Pause]
[0:45] Emma Wall: Turning to the markets, it was a very interesting start to the week – because, although the headlines were full of events going on – and fear and concern – on Monday, actually, the market opened with a reasonably muted response. We saw some strength from the US Dollar, some strength from gold – but, actually, equity markets were reasonably unaffected – down between 1-2%, 3% – and, even in the Middle East, actually, you saw a lot of the negative sentiment mitigated by the exposures that those indices have to energy firms which benefitted on the expectation of a higher oil price.
Going through the week – into Tuesday and Wednesday – you’ve begun to feel a lot more of the impact of what’s going on in the Middle East. So, if we have a look the Volatility Index, for example – we, at HL, feel like 24 is the level at which it peaks interest – it’s above usual volatility levels – and volatility... the VIX Index reached 28 yesterday, so heightened volatility and much more impact.
We saw some really interesting equity sell-offs, particularly in Asia – we saw Europe down – and the US started yesterday (that’s Tuesday) down, but then there were some mitigating factors. Donald Trump stepped in and said that, actually, he would be responsible for ensuring any tankers that were going through the Strait of Hormuz and would ensure that they had insurance and, indeed, escorts. And the reason why this is really important is the Strait of Hormuz is responsible for around 20% of daily oil flow, globally – and it was this concern about a supply shock that really has destabilised markets. There are echoes of the 1979 oil shock, which caused global impact in terms of economic growth, markets, and really caused quite rampant inflation.
There are a number of reasons why we think this fear is overblown, however – you know, the oil market and the dynamics in global trade, when it comes to oil and gas, have changed significantly since 1979. For example, in 1979, the US was a net importer of oil – it’s now the second largest exporter in the world. We also have seen much less dependence on oil – you know, things like renewable energy have become far more popular, and there are also alternative trade routes that don’t rely on the Strait of Hormuz – there are pipelines in the Red Sea. However, that’s not to underestimate its importance, and it’s why the focus – certainly from a military point of view and from a markets point of view – is so much on this very narrow strip of sea, which seems to be really determining what happens next in markets.
So, that’s the kind of overview – and we can come onto what we think happens next and what investors should do after we dig a little bit more into what’s been happening with specific sectors.
Matt, let’s turn to Defence.
[3:45] Matt Britzman: Yeah – thanks, Emma.
So, you mentioned some of these reactions in stock prices that we saw at the start of this week. Defence was one of those sectors that had a positive reaction on Monday, but that was actually relatively short-lived – we’ve seen some of those come down since then.
When we’re thinking specifically about sectors and long-term drivers of performance – and I think it’s that long-term element that’s really important here. For defence companies, one single conflict – if it does happen to be short-lived – doesn’t necessarily lead to longer-term changes to defence budgets from governments, which is ultimately what drives earnings for defence companies. So, there tends to be a typical cycle here, where the conflicts will come – you’ll then get a market reaction – whether they think the conflict is gonna be prolonged or short-term... Potentially, we’re seeing the markets suggest that they think this is going to be short-term – and then, if that leads to growing expectations that military budgets are actually gonna improve, that can then flow through later down the line to revenue and earnings.
But I think, if the base case here is that this is a short-lived conflict, then we don’t really think that this is gonna a material driver of increased spend, moving forward – which is why we probably expect to see volatility within the defence names, but not necessarily a prolonged uplift that’s gonna be sustainable – and, I think, if we look back to what’s happened over the past 12-18 months already, we’ve already seen expectations of defence spending rise. So, if we think the White House has suggested that a 50% increase to US defence spending is potentially on the cards, we’ve had NATO nations propose increased defence spending on that side. So, we think the sector already has increased defence spending priced in – and is one of the reasons why, from a valuation standpoint, we think that it’s not quite as attractive as it has been in the past.
So, I think our message on defence for investors would be... be wary, slightly, of trying to extrapolate a short-term conflict into something that’s going to materially alter those long-term drivers of defence revenues. And the other thing to think about with the defence sector is that these contracts are long-term. This isn’t a sector where you put an order in and you get a delivery in two weeks’ time.
If we look to one of the companies that we have undercover, it’s BAE in this sector. They have a current order backlog of £80bn – so, you know, this is a long-term sector with long-term revenue drivers – so our message would be... our view on the defence sector hasn’t materially shifted as of yet. How long this conflict lasts will have an impact on that – but, if the base case that this is a short-lived conflict does come to pass, we think that this volatility in the defence names is gonna continue, but not potentially be a long-term driver of additional revenue for these companies.
[6:50] Emma Wall: Thanks, Matt – that feels like a good opportunity to talk about broader markets as well. We’ve sort of deep-dived a bit there on equities – but this has been a conflict that has impacted bond prices and gold prices as well.
We saw US Dollar strength – and we did also see on the expectation of higher inflation – and, therefore, higher rates for longer – and not the two cuts that we were expecting from the Treasury, over the next 10 months, materialising. We saw bond yields in both the US and the UK rise. We saw gold, initially, rise and then, indeed, fall, as people looked to take some of those gains, and potentially put them into other safe-haven assets – you know, maybe even taking advantage of the higher rates of income that you can get from low-risk bonds across the globe.
All of this paints a picture of how important it is to diversify. As you say, our base case is that, although the data is troubling, actually, we don’t think this triggers a financial crisis – so that toxic combination of asset prices collapsing, coupled with recession. You know, the fear is understandable, but we don’t think this is a prolonged bear market – that’s not our base-case scenario. The US military is a global strength – and President Trump has made it clear that restoring global energy supply is a priority.
In the meantime, we do expect volatility – you know, once the route’s secured, markets should return to optimism – but the volatility that we have come to anticipate is the norm under Trump will continue. So, the most sensible investment strategy, therefore, is to sit tight and really focus on a well-diversified portfolio, with exposure to different asset classes, geographies and styles – and that will mean that you are most-robustly placed against this uncertainty.
[8:38] Matt Britzman: Thanks Emma – yeah, I think, kind of hit the nail on the head there with diversification.
I also think, sometimes, it’s important for investors just to zoom out. Despite the volatility, despite some of the sell-off and the news headlines that investors would have been reading, markets aren’t that far off all-time highs at the moment. So, as of closing prices yesterday – which would be 3rd March – FTSE 100’s just shy of 4% off its all-time high – the S&P 500 just over 2% off it’s all-time high. So, I think, alongside that diversification point, it’s also important for investors to think about the long term and to, sometimes, zoom out from the near-term headlines.
Changing track here, we did have that Spring Statement – and there were some updated figures as well from the Office of Budget Responsibility. D’you wanna just take us through some of the key takeaways from that?
[9:24] Emma Wall: Yeah, it was easy to miss. It’s interesting – because, in a normal year, the Spring Statement would be our focus, wouldn’t it, Matt? – like the team would be thinking about the Spring Statement and what impact it would have on markets and economics – and, actually, it was very much overshadowed by what’s happening in the Middle East, both in terms of our focus, but also the wider market.
Couple of reason for this... it was a bit of a non-event in terms of the policy announcements. The Chancellor, Rachel Reeves – here in the UK – very much focusing on the Office of Budget Responsibility’s progress report, and not on announcing any new policies – or even giving an update on those policies that were announced in November’s budget. Instead, the message was very much about how Labour has managed to deliver lower borrowing, higher growth – although not, it should be said, in the year 2026. Growth for 2026 was actually downgraded to 1.1% from 1.4%, but 2027/2028 growth looked robust – and also the report credited recent measures with having lowered inflation.
Interestingly, the market wasn’t looking at that data, however – you know, normally, we might expect that data to result in lower yields, strong sterling – because, ultimately, it is cautiously optimistic outlook for the UK. Instead, what the market was considering is, ‘Inflation might be lower now, but how is what’s happened in the Middle East – and higher oil prices and oil reaching $85 a barrel, potentially going higher – flow through into the inflation that we’re experiencing in the UK – and, therefore, actually, how much certainty can be put around the numbers and the data released yesterday?’
So, a non-event in terms of the report, itself, but the outlook very much overshadowed by what’s going on in the Middle East.
[11:14] Matt Britzman: Thanks, Emma – and that’s all for this week. This session was recorded on March 4th 2026, and all information was correct at the time of recording.
Next week, Helen Morrissey and Clare Stinton are back with another Personal Finance episode.
[11:27] Emma Wall: Nothing in this podcast is personal advice – you should seek advice if you’re unsure what’s right for you.
[11:32] Matt Britzman: And investments rise and fall in value, so you could get back less than you invest – and past performance is not a guide to the future.
[11:38] Emma Wall: As always, this is not a recommendation to buy, sell, or hold any of the investments or companies we’ve discussed today. No view is given on the present or future value, or price of any investment, and investors should form their own view on any proposed investment.
[11:50] Matt Britzman: So, all that’s left is for us to thank our Producer, Elizabeth Hotson.
[11:53] Emma Wall: And to thank you, very much, for listening – we’ll be back again soon. Goodbye!
[11:57] Matt Britzman: Goodbye!