The Week Ahead (9 – 13 Mar): Iran War, Interest Rates, UK & US Housing, UK GDP, Adobe, Somero

Markets

What a week! Everything has been overshadowed by geopolitical events. There is an old market adage that says, “in a crisis, the only thing that goes up is correlation!” and so it seems over this past week. Days seem to have been marked out as either risk on or risk off, with major indices moving in step with commodities such as gold and silver. Only energy has broken the trend, with oil up on the closure of the Straits of Hormuz, and natural gas on the news that Qatar was ceasing LNG shipments.

While this may seem another victory for the FTSE100 over the last month, this is a largely phiric one, as a flight to safety saw the US dollar strengthened against the pound, making the moves in dollar terms broadly similar.

Iran cannot win a war against the US and Israel. However, they don’t have to win to cause chaos, and we have already seen an Iranian missile hit Bahrain’s main oil refinery and a number of oil tankers hit in the Persian Gulf. US administration estimates of how long this war will last have already gone up from 2 weeks to 100 days. The US stated goal of regime change is very hard to achieve through airpower alone. This may go on for some time…

Here's what we can look forward to next week:

Economic Calendar

Interest Rates

It is far too soon to see the impact of recent geopolitical events on economic data. However, this doesn’t mean there hasn’t been any change to outlook. Treasury yields have risen as investors worry about inflation from energy prices. Futures markets now price the first Fed rate cut around September, rather than earlier in the year. It is worth noting that the US is relatively energy independent, so the main expected effect is a delay in the easing cycle, not raising rates.

The UK is more exposed to global energy prices, which means that 10-year gilts have seen a bigger impact, rising above 4.5%:

[All charts in this section: Trading Economics]

UK House Prices

One of the big impacts of rising gilt yields is that UK mortgage rates will increase in the short term. One of the most forward-looking indicators is the RICS House Price Balance. To get this number, the Royal Institution of Chartered Surveyors asks surveyors whether house prices in their area have gone up, down, or stayed the same over the last three months. Above zero means the majority of surveyors are seeing rises.

January’s figure came in at -10%, which was at the bottom end of expectations. However, the prevailing view among surveyors is that the market is entering the early stages of recovery, and forecasts reflect this:

US Housing

Across the pond, two key forward housing indicators will be released on Thursday.

Building Permits:

Housing Starts:

Both of these have been strong recently. Markets will be looking for this strength to continue.

UK GDP growth

This will be the first big datapoint since the Chancellor's Spring Statement. Markets will be looking for proof that the economy is indeed turning the corner as the government claims, and current forecasts suggest:

Companies Reporting

A very quiet week for US stocks, but plenty of UK news coming up:

As usual, if you think I've missed any key news, please let me know in the comments.

Adobe (NSQ:ADBE)

When I previewed this on TWA in December, prior to their last set of quarterly results, I said:

It seems market participants who fear the impact of AI on businesses such as this won’t hold at any price, even if there is no sign of that disruption in the current forecasts. This may provide an opportunity for investors willing to take the other side of that trade.

The company beat expectations again slightly:

While this was initially greeted well by the market, general market conditions, together with the “SaaS-pocalypse”, have caused the share to drop by around 20% after the initial positivity.

However, there is little sign that AI is impacting their financials:

Which means the valuation here is surely starting to look compelling for a business that has shown 13% CAGR revenue growth over the last 5 years and enjoys a 50%+ Return on Equity:

In the upcoming results, investors will be closely watching the Net New Annualised Recurring Revenue as a sign that customers still see their offering as relevant in the current environment. They will also want to see proof that Firefly (Adobe’s GenAI) is driving "credit consumption" that forces users to upgrade to higher-priced tiers.

Somero Enterprises (LON:SOM)

Somero remains a high-quality company:

But one that is struggling for growth:

Revenue figures for FY25 are known from the recent trading statement, and again highlight how US-focused this company remains:

We can expect these results to include a breakdown by machine type, not just region. This may give an indication as to whether any of their newer innovations are starting to gain traction.

The broker consensus isn’t particularly encouraging, and Cavendish has been so far unwilling to give guidance for FY26:

Therefore, all eyes will be on the outlook statement and how Cavendish interprets this in their FY26 forecast (assuming this will be forthcoming). If there is a return to growth, then the cash flow characteristics of this business may make it an interesting investment proposition again. If 2026 ends up similar to 2025, this will look overvalued on a P/E of around 15.