Amid the ongoing conflict in the Middle East, Peter Berezin, Chief Global Strategist and Director of Research at BCA Research, has suggested assets to consider in the current environment as uncertainty clouds the global economic outlook.
Berezin highlighted that cash is the best bet at the moment, advising against equities despite stocks retreating since the conflict pitting the U.S. and Israel against Iran began in late February, he said in an interview with David Lin published on April 2.
He noted that while stocks may appear attractive, valuations remain high at about 20 times forward earnings, with profit margins near peak levels.
Therefore, this leaves markets exposed to a dual downside risk, where both multiples and earnings could decline, especially in the tech sector.
In this environment, holding extra cash is a strategic move with Berezin suggesting avoiding aggressive equity exposure for now, as risks remain elevated, and instead maintaining liquidity to take advantage of better opportunities if markets sell off.
“I like cash right now. There’s just a lot of risk out there. Stocks have gotten cheaper compared to where they were earlier this year. <…> So, there’s a risk that not only does the P multiple come down, but there’s a risk that those huge profit margins, especially in the tech sector, start to decline. <…> I would say keep a little bit extra cash on hand,” he noted.
Recession risks
At the same time, the ongoing conflict has raised macroeconomic concerns, with the strategist warning that there remains a possibility the war could lead to a recession.
To this end, this has pushed recession risks to about 40% in the United States and around 50% in Europe and Japan, according to Berezin. However, he noted that while elevated, these levels do not make a downturn inevitable.
He added that several factors could still support the global economy, including easing oil prices if the conflict stabilizes, incoming fiscal stimulus for U.S. households, and potential tariff reductions.
Central banks may also have room to cut rates if inflation eases alongside falling energy costs, while stimulus in Germany and China could provide additional support.
However, Berezin said that avoiding a downturn will depend largely on two factors, including a resolution to the oil shock and continued strong investment in artificial intelligence.
A slowdown in AI-related capital expenditure would significantly raise recession risks, regardless of energy market developments.
