Stocks can remain stable despite major short-term disruptions, like an energy crisis. Their valuation is based on the discounted value of all future earnings, making a single weak quarter mathematically less significant if the long-term outlook remains intact.
Despite higher earnings growth and low energy exposure, large-cap technology stocks have derated significantly. They now trade at valuations comparable to the much slower-growing consumer staples sector, presenting a potential relative value opportunity.
Bonds are caught between inflationary pressures (negative) and growth risks (positive). This tension is viewed as unsustainable and likely to resolve with yields falling, as either inflation abates or a prolonged disruption forces a focus on severe growth risks.