Market Musings 310526: Keep your FOMO in check
Are stocks living in an alternate reality?
In the real world, the Strait of Hormuz remains to all intents and purposes closed, depriving oil-importing nations around the globe of 10 million barrels of crude oil per day, i.e. nearly 10% ovf daily demand. Since the beginning of March, this export shortfall has been satisfied with existing oil stocks such as the strategic stockpiles held in the US, China and Japan.
However, oil industry experts predict that these global oil inventories will fall to critical levels by the end of June in the absence of a reopening of Hormuz. Under such a scenario, we should expect oil and gas prices to rise substantially from current levels, perhaps approaching the $148 peak experienced for 2-3 months in 2008. This extreme price level would force a huge cut in global oil demand to match lower supply, likely triggering a global recession in the process as in 2008. This sounds a rather pessimistic economic outlook.
And yet, global stock markets seem to be completely ignoring this rising recession risk. The US stock market has achieved a series of new all-time highs over the past few weeks, completely erasing the 9% initial drop from the end of February upon the first US-Israeli missile attack on Iran. The twin narratives of AI investment spending and strong Q1 results have enabled the Tech sector to propel the US and Emerging Markets to new highs, seemingly oblivious to events in the Middle East. The tech-heavy Nasdaq 100 index has returned 20% so far this year, with the star semiconductor sector registering a 66% advance since the end of 2025.
Semiconductors the star of 2026
The South Korean KOSPI index has even outperformed the US semiconductor sector this year thanks to memory makers SK Hynix and Samsung, more than doubling in 2026.
Are we in an AI Mania phase? How do we invest?
The exuberant performance of semiconductor stocks and the Korean KOSPI index over April and May suggests that retail investors have entered a manic “buy all stocks AI investment-related” phase, echoing some of the…
