I keep a quote pinned above my desk. F. Scott Fitzgerald wrote it almost a century ago, and I've been thinking about it a lot this month. "The test of a first-rate intelligence," he wrote, "is the ability to hold two opposed ideas in mind at the same time, and still retain the ability to function." That, more than anything else, is what good investing looks like right now.

This month's theme is simple: analyse risk like a pessimist. Invest like an optimist. Hold both thoughts at once. I know that sounds easier said than done when the news has been this loud. So let me walk you through exactly what I've been thinking.

Let me be honest about March and the first week of April. It was ugly. A few weeks ago, the CNN Fear and Greed Index touched 9, on a scale of 0 to 100. That is about as close to full-blown panic as markets get. One month ago the index was sitting at 41. A year ago, 26. Investors went from cautious to borderline terrified in a matter of weeks.

CNN Business Fear Gauge

Today that number has recovered to 31, still firmly in fear territory, but no longer the screaming red of extreme fear. The direction of travel matters. Markets are beginning to breathe again.

The cause is not a mystery. The US-Iran war that began in late February shut down the Strait of Hormuz, the narrow waterway through which roughly one in every five barrels of oil on the planet passes. Almost overnight, oil prices surged forty per cent. Petrol at the bowser. Electricity bills. Fertiliser. The cost of practically everything connected to oil, which is to say, nearly everything, started climbing. As of Tuesday this week, 187 loaded tankers carrying 172 million barrels of oil were still sitting idle inside the Gulf, waiting. That backlog does not clear overnight, whatever the diplomats announce.

Then on Wednesday, news broke: a fragile two-week ceasefire between the United States and Iran. Markets responded immediately. The Dow surged 1,325 points, its best single day in over a year. The S&P 500 gained two and a half per cent. Oil fell hard, over thirteen per cent in a single session. Stocks in Tokyo, Seoul, Frankfurt, and Paris were all up sharply.

And here's why this moment matters for you as an investor. If you had panicked and sold last week when fear hit rock bottom, you missed that Wednesday. You locked in losses and sat on the sideline while the market recovered. This is not hypothetical, the data is ruthless on this point. Missing just the ten best days of any decade can cut your long-term return almost in half. The market sprints fastest when almost nobody wants to be in it.

Source: ATB Investment Management

What Could Still Go Wrong?

Now let me put on the pessimist hat, because that is not optional. That is the job.

This ceasefire is described by Iran itself as temporary. Tehran has made clear it reserves the right to re-close the Strait. The terms of any tanker passage remain disputed, Iran and Oman are reportedly looking to charge transit fees of up to two million dollars per vessel. That is not how free passage works, and Washington knows it.

I still place roughly a ten per cent probability on the United States sending ground troops into the region and turning this into a prolonged conflict. That would be devastating, for the global economy, for oil markets, and frankly for any portfolio that is not extremely defensively positioned. Ten per cent is not zero. You do not ignore a one-in-ten chance when the downside is severe.

That said, the probability has come down. Last week's successful US rescue mission for a downed F-35 pilot, extraordinary in its execution, came at a cost. By some estimates, close to four billion dollars worth of aircraft and equipment was destroyed in that single operation. President Trump is many things, but he is also a man who reads a balance sheet. The political and financial price of escalation is becoming very legible, very fast. The TPPI, the Trump Pain Point Index, tracks the economic conditions that historically prompt the President to soften his position. It is elevated. He tends to blink when the numbers get loud enough. Whether he blinks in time is the question nobody can answer with certainty.

Now let’s talk about Australia because this is where it gets genuinely complicated. The RBA has raised interest rates twice this year. On the surface you might think the economy must be running hot. Unemployment sits at 4.3 per cent. That is below the level the Reserve Bank considers consistent with low inflation. So they are tightening. Seems logical.

But here is the RBA’s dilemma and it is a real one. The jobs number is not telling the truth or at least not the whole truth. Talk to any business owner outside the care sector right now and they will tell you the economy feels much softer than the headline unemployment figure suggests. Hospitality is struggling. Arts. Education. Small business broadly. The labour market looks tight on paper precisely because one sector has been absorbing workers at an extraordinary rate. That sector is the NDIS.

NDIS related employment has grown 52 per cent since 2020. That is nearly four times the rate of the broader economy. An additional 300,000 people have entered disability related work in five years. This sector represents only six per cent of all jobs yet it has contributed 16.5 per cent of all employment growth since 2020. Without it the jobs market would look fundamentally weaker and the RBA would almost certainly not be raising rates right now.

NDIS Employment Growth, Source AFR, ABS

The problem is that the NDIS is a $52 billion annual program growing at over ten per cent a year. The government’s own Health Minister called it way out of control. With the May budget approaching Canberra is scrambling to cut the growth rate in half. The single biggest engine of job creation in this country is about to be deliberately slowed down by the same government that created it.

That is the RBA’s conundrum in plain English. They are raising rates to cool an economy that only looks hot because the government is spending money it does not have on jobs that do not produce tradeable goods or services. When that spending eventually pulls back as it must the unemployment number is going to look very different.

There is a deeper problem underneath all of that. These are by definition lower productivity jobs. They are caring and essential and I want to be clear about that. But they do not generate the kind of output per hour that drives real wages higher over time. When employment growth is concentrated in lower productivity sectors it drags the national productivity average down. When productivity stagnates real living standards stagnate with it. That is what has happened to Australia over the past decade.

Here is where it becomes personal for an entire generation. Low productivity growth means wages do not keep pace with asset prices. Houses remain unaffordable. Rents keep climbing. The RBA’s rate rises make servicing a mortgage harder rather than easier. For young Australians in their twenties and thirties, they are less likely to own a home like their parents generation, less likely to get married or have kids. The numbers confirm it.

When people cannot afford to own a stake in their community they stop feeling invested in it. And when they stop feeling invested in it, they likely to take on extreme political views. Young Australians are drifting toward the fringes with One Nation on one side and the Greens on the other. Not because they are irrational but because they perceive that the mainstream parties have presided over a model that has delivered for asset owners and left everyone else behind. Parties at the extremes seem more appealing when you feel like you have nothing to lose.

As investors and as citizens we should take this seriously. Political instability has a way of becoming economic instability, Now that’s a pessimistic view.

Why Do We Stay Invested?

And yet, and this is where Fitzgerald's two thoughts have to coexist, the case for staying invested remains powerful. More than that: the case for believing in human progress remains overwhelming.

Since 1900, through two world wars, the Great Depression, multiple oil shocks, pandemics, and every kind of political crisis imaginable, the S&P 500 and corporate earnings have tracked each other with a 98 per cent correlation. Not political headlines. Not fear gauges. Earnings. The weighing machine always wins in the end.

Source: Creative Planning

Here is the thing that gets lost in the noise. Every generation in history has faced its defining crisis and concluded that this time, finally, civilisation might not make it through. They were wrong. Every single time. Human beings are remarkably good at solving problems, inventing their way out of scarcity, and building something better on the other side of catastrophe. That is not naive optimism, that is the empirical record.

April is historically the second-best month of the year for the S&P 500 since 1928. The index has risen in 63 per cent of all Aprils, with average gains of over four per cent in the positive years. Seasonality is not destiny, but it is a gentle tailwind right now.

Source: Bloomberg

Hendrik Bessembinder's landmark study covering 100 years of US equity data found that just 46 companies,out of nearly 30,000 listed over that century, accounted for half of all the wealth created by the entire stock market. Miss those companies, and you miss the compounding engine. The single greatest risk for long-term investors is not uncertainty in markets. It is being out of the market when the best days arrive unannounced. Wednesday's rally was a reminder. The best days almost always arrive when the news is still frightening, the ceasefire still fragile, and the pessimist in you is saying it could all fall apart.

The ceasefire holds, for now. The tankers are still waiting. The RBA is still watching prices. And Fitzgerald's two ideas are still sitting side by side on my desk.

I want to leave you with one more thought. As Australians grapple with fuel shortages and rising costs, the response from Canberra has been to encourage people to exercise "common sense." Ronald Reagan, forty years ago, had a line for moments like this. He said the nine most terrifying words in the English language are: "I'm from the government and I'm here to help." Some things don't change.

What does stay constant, and this is what I keep coming back to, is Warren Buffett's reminder that only when the tide goes out do you discover who's been swimming naked. We have built your investments to keep their trunks on in all conditions. Stay invested. Stay curious. And as always, if anything here has raised a question or you just want to talk something through, please don't hesitate to reach out. We're always here. Until next month, take care.