Stock markets hate change, so why haven’t they moved?

Published in Business Eye in the April edition 2026 

Stock markets hate change. It reminds investors of how many ways the future can unfold and in the short-term, that uncertainty is hard to price.

Yet for all the turbulence of recent months, the stock market is still up over 20% from the ‘liberation day’ low a year ago. Beneath the surface, however, the impacts of the Middle East conflict, announcements of AI advances, and the general volatility that follows President Trump is unmistakable. Crucially, with gaps appearing between the market winners and losers, it once again pays to be selective with your investments.

AI is eating software’s lunch?

Nowhere are these gaps more obvious than in the reaction to AI. For as long as the market is still trying to understand what it means for businesses, any industries believed to be impacted are vulnerable to short-term price swings.

Software companies were the first high profile casualty – losing over a quarter* of their value in the last six months. They face a dual threat: that AI powered start-ups can deliver the same work at a lower price, and the possibility that “vibe-coding” will enable businesses to create much of the software they need internally. For the businesses that can use AI to adapt and improve, that is an opportunity, not a risk.

The software sell-off is a warning sign to other industries – but history has some lessons for those chasing the early movers. Firstly, it isn’t necessary to get in early. Many of the big internet companies of the early 2000’s weren’t the long-term winners (and some don’t exist today). Second, like the railway boom, or fibre-optic rollout, the capacity we are building today might be more than what we need in the future.

Iran, oil and inflation

Moving to the conflict in Iran, these types of events are a good example of how (uncomfortably) pragmatic markets can be. The most important thing, for markets, is whether the conflict has a lasting economic impact. A prolonged closure of the Strait of Hormuz could keep oil prices high. In turn, that could slow the economy because of both trade disruption and the knock-on effects of higher oil prices. The market is also now expecting interest rate increases to manage inflation. On the final point, the data is less clear. Periods of high oil prices can be deflationary, stopping spending elsewhere, and many economists think the economy is not strong enough to deal with rate increases in response.

Markets will remain sensitive to any signs of escalation and so it remains a tense situation that deserves careful observation.

High valuations are cause for caution, not crisis

Finally, there is a growing narrative that the stock market is ‘expensive’ and therefore, it is vulnerable to a correction. High valuations, on their own, rarely trigger stock market sell offs. Crises happen because something breaks, not because prices have drifted up. Instead, a more expensive market means that we should prepared for potentially lower returns.

In this type of market, investors can either accept lower returns, or they can try to improve them through selective active decision making. Active investing fell out of favour during the years when market performance was strong, but history suggests it is more valuable when dispersion is high, and the easy returns disappear. That is precisely the market environment that we are entering. As different sectors, regions, and companies, respond differently to change only the diversified investors will be able to avoid the risks, and capture the opportunities.

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*Based on the GICS United States Software Sub-Industry classification.