CEO House View | The Worst of the Middle East Conflict Is Behind Us, Fundamentals Are Back in Charge

💡Global equities experienced a sharp rebound in April as concerns over the US-Israel-Iran conflict eased, with global tech stocks showing the greatest strength. US and Asian markets achieved staggering gains, reaching all-time highs. The Philadelphia Semiconductor Index (SOX) led this surge with a massive 31.6% increase, reflecting a market environment where fundamentals reasserted themselves.

💡Despite the significant equity surge in April, several other asset classes remained range-bound. These included fixed income, where yields were largely unchanged and continued their prior range-bound volatility. In commodities, crude oil remained at elevated levels due to ongoing conflict, while gold fluctuated amid competing forces, ultimately edging slightly lower.

💡Two major pressures that significantly influence Trump's foreign policy decisions are Treasury yields approaching 4.5% and oil prices breaking above $100 or even $110 per barrel. Treasury yields at 4.5% signal a tightening of financial conditions, impacting interest rates he prioritizes, while oil prices exceeding $100-$110 per barrel represent a critical point where demand experiences a substantial hit.

💡Treasury yields approaching 4.5% indicates a tightening of financial conditions, which would further impact the interest rates that are a primary concern for Trump. This level serves as a significant pressure point that can influence policy decisions and market reactions, reflecting increased borrowing costs and potential economic slowdowns.

💡Demand begins to take a substantial hit when oil prices break above $100 or even $110 per barrel, representing a critical price point for the market. This threshold has been identified as a key factor influencing policy corrections, as such elevated prices can significantly impact inflation, interest rates, and overall economic demand.

💡When WTI crude exceeded $110 per barrel and Treasury yields neared 4.5% in early April, Trump's stance began to marginally soften. He quickly changed his tune, stating that the war could end within two to three weeks, and subsequently alleviated market pressure through a phased ceasefire. This demonstrated a pattern of policy correction when these red lines are crossed.

💡The recent market correction is considered a 'valuation correction' rather than a painful 'earnings correction' because underlying fundamentals have not been significantly disrupted by the war. Economic and industry data from March confirmed this view, with strong AI demand continuing to exceed expectations, preventing a deterioration into widespread earnings issues.

💡The core reason for the sustained market performance, according to MacroMicro, is the exceptional strength of AI demand, which continues to far exceed expectations. This robust demand is driving significant investment and computing power, particularly in the semiconductor cycle, thereby preventing the market correction from deteriorating into an earnings correction.

💡The fierce competition among the three major AI model camps (ChatGPT, Gemini, Claude, and GPT 5.5) indicates continued investment and computing power demand, regardless of which model ultimately wins the race. This ongoing rivalry ensures a continuous cycle of innovation, driving further investment in computing infrastructure and strengthening the semiconductor cycle.

💡Taiwan's Q2 export value is highly likely to cross the $70 billion mark, with a chance of approaching $80 billion by year-end, indicating strong economic growth. This trend suggests that even with a higher base period, subsequent export growth can maintain double digits and potentially exceed 30%, leading Taiwan's economic growth this year to replicate last year's strong performance, landing at an exceptionally strong 8%.