MAPS Portfolio Note: Don’t panic – the best returns are made when markets feel the worst

• A combination of AI-driven fears in software stocks and the US-Iran conflict has unsettled markets in 1Q26. It is understandable to feel concerned, but fear has historically been a poor guide for investment decisions.

• The good news is that in 19 out of 20 post-WWII geopolitical crises, the S&P 500 recovered within a month. After the Russia-Ukraine war triggered a 25% plunge in the S&P 500, markets rallied 78%. The pattern is reassuringly consistent.

• In the long-term, earnings – not headlines – drive share prices. Notably, 2026 forward EPS for the S&P 500 has reached a record high of USD 317.54, even as the market sells off.

• Our conviction in Japan and the digital economy remains unchanged. Both markets are underpinned by long-term structural drivers that we believe will reward patient investors.

• Our advice for investors is to make use of Regular Saving Plans (RSPs), prepare lump sums for a deeper pullback, and above all – do not panic sell.

The first quarter of 2026 has tested investor nerves on multiple fronts. A sharp selloff in software stocks, triggered by growing fears that AI could disrupt established business models, has wiped significant value off the tech sector. Major names such as Salesforce and Adobe have declined 23.3% to 26.2% year-to-date respectively, while the iShares Expanded Tech-Software Sector ETF has fallen more than 17% (as of 18 Mar 2026).

Compounding this, the US-Israeli military strikes on Iran, which began on 28 Feb, have now entered their third week. Iran has effectively closed the Strait of Hormuz, through which roughly 20% of the world’s daily oil supply flows and Brent crude briefly touched USD 119 earlier in the conflict. The S&P 500 closed at 6,624 on 18 March, down roughly 5% from its January high while Asia bore the brunt of the initial shock on 9 March, with Japan’s Nikkei 225 falling as much as 7% and South Korea’s KOSPI plunging over 8% intraday, triggering a circuit breaker. 

It is a lot to take in, and we know many of you are feeling uneasy. But we have seen environments like this before, and they have consistently rewarded those who stayed the course. Our advice is simple: do not panic sell.

Geopolitical crises have little lasting impact on share prices

It is natural to worry that wars will permanently damage your investments. But history paints a more reassuring picture. In an evaluation of 20 major post-WWII military interventions, the S&P 500 fell an average of just 6% from the initial impact to the trough. In 19 of those 20 events, the market recovered within an average of 28 days – regardless of how long the conflict lasted.

Figure 1: S&P 500 performance around select major geopolitical events

The Russia-Ukraine war of 2022 is a recent example. Oil surged above USD 130 and the S&P 500 declined roughly 25% from peak to trough. Yet it bottomed in October 2022 and rallied approximately 78% from 2023 through end-2025. Oil prices also normalised far more quickly than anyone expected. Despite widespread predictions that Russian crude would be permanently removed from global markets, supply found alternative routes and prices returned to pre-war levels. The fear turned out to be far worse than the reality – and we believe the same will prove true this time.

Just recently, Iran’s Revolutionary Guard Corps has threatened to push oil prices to USD 200 per barrel, a headline that understandably causes concern. But the highest nominal price ever recorded was approximately USD 147 in 2008 (roughly USD 211 in today’s money), and that spike was short-lived. Every major oil shock in the past 50 years from the 1973 embargo to the 2022 Russia-Ukraine war saw a temporary impact on equity markets followed by a recovery.

The international response has been swift: the International Energy Agency (IEA) has agreed to release 400 million stockpiled barrels (the largest such action in history), the US has issued waivers for India to purchase sanctioned Russian oil, and the US military is actively targeting Iranian missile sites along the Strait to secure the waterway. While we take the risks seriously, the US is far better positioned to absorb an oil shock today than in past decades, with domestic production near record highs.

Related Article: $200 oil sounds terrifying. The data says otherwise.

Crucially, the fundamentals underpinning equity markets remain intact. Despite the current turmoil, 2026 forward EPS for the S&P 500 recently reached a record high of USD 317.54, and analysts have seen no material adverse impact from the Iran conflict. The index’s decline has been driven by valuation compression – the forward PE has fallen from approximately 21.9X to around 20.8X – rather than any deterioration in corporate profits. This suggests that the current selloff is driven more by sentiment than by any fundamental weakening. 

We would like to remind investors again that markets can swing wildly in the short term, driven by headlines and uncertainty. But over the long run, share prices are anchored by something far more durable: corporate earnings. It pays to think in years, not days. 

Figure 2: Earnings ultimately drive share prices over time

Our convictions remain unchanged. In Japan, the investment case continues to be underpinned by a structural transformation of the economy. Ongoing corporate governance reforms are unlocking shareholder value, while a sustained shift from deflation to inflation alongside steady wage growth is driving a virtuous cycle of stronger consumption and improving corporate profitability.

At the same time, the government’s continued commitment to strategic sectors such as semiconductors, AI, and defence reinforces this positive backdrop. Taken together, these factors create a supportive environment for Japanese equities. Despite the recent pullback in the Nikkei 225, the long-term investment case remains compelling.

In the digital economy, we remain positive because the long-term growth drivers behind this theme have not changed. AI adoption is accelerating, technology spending continues to grow, and semiconductors, which power the infrastructure behind AI remain in strong demand. These are industries with high barriers to entry, where the leading companies are well positioned to benefit for years to come. If anything, the recent pullback in valuations has made this theme more attractive, not less. Our team is actively looking for opportunities to further increase our exposure to these high conviction markets should circumstances allow. 

What should investors do?

Do not panic sell. This is the single most important piece of advice we can offer. Equity markets have historically recovered from every major geopolitical crisis. Selling during a downturn locks in your losses and means missing the recovery, which often comes sooner than you expect.

Continue with Regular Savings Plans (RSPs). This is exactly the kind of environment where dollar-cost averaging works hardest for you. Purchasing more units at lower prices and reducing your average cost over time. If anything, this is the time to increase your contributions.

Prepare for lump-sum deployment on a bigger pullback. A deeper correction from peak levels could present an even more compelling entry point. Be patient, but be prepared.

Your MAPS portfolios are built for the long term. Our team remains calm, disciplined, and focused on the fundamentals that drive lasting returns. If you are already invested, stay the course and consider topping up through your RSP. If you have been waiting on the sidelines, the current pullback offers a more attractive entry point than we have seen in over a year.