Maximizing Returns Amidst Extreme Volatility

Understanding the implications of New Cold War investing is crucial for modern investors aiming to navigate these turbulent times effectively.

Investing might be getting harder—echoing the era of the 1970s Oil Shock. Following the recent escalations between Israel and Iran, the difficulty of investing is likely to increase. However, a tougher market environment does not inherently mean lower returns. In fact, extreme volatility can serve as an opportunity to amplify your yields in the context of New Cold War investing.

First and foremost, we must identify which historical period mirrors our current reality. Aligning past macroeconomic cycles with the present is one of the most effective approaches to decoding the structural changes underway in global capital markets.

Today’s focal points are: Interest Rates, Inflation, Oil, Gold, National Security, and Broad Commodities in the Energy Transition Era.

“Post-COVID-19 Inflation × Rising Rates… What happens if an oil spike is added to the mix?”

Does History Repeat? The Structural Realignment

While it’s difficult to label the current environment a pure “oil shock,” we must remain hyper-vigilant regarding the escalating Middle East tensions centered around Iran. Let’s examine the present through this historical lens.

The true origin of the 1970s shock must be traced back to the “Nixon Shock” prior to the oil crisis. In August 1971, the abolition of the gold standard—the collapse of the Bretton Woods system—marked the beginning of a highly volatile era for asset markets.

The first Oil Shock was then triggered in October 1973 by the Yom Kippur War. From that point on, entrenched high inflation and high interest rates dominated the landscape until the early 1980s.

The Historical Parallels:

• 1971: Currency devaluation (End of Gold Standard)
• 1973: Oil Shock — Energy & Geopolitical Risks
• 2020: COVID-19 Pandemic & Massive Liquidity Injections
• 2022~Present: Russia-Ukraine War & Escalating Middle East Conflicts

This undeniable resemblance draws our attention to the sectors that demonstrated secular strength from the mid-1970s to the early 1980s. The collapse of the “Nifty Fifty” (premium growth stocks) gave way to a massive rally in Energy and Commodity-related equities.

What are Today’s Blue Chips?

Following the oil shock, real-asset equities surged significantly due to inflation, while value and cash-generating blue-chip stocks showed relative resilience amid high interest rates. Conversely, sectors with high debt ratios or poor cash flows suffered devastating losses.

Today, major Big Tech firms driving the AI revolution have secured massive profitability, allowing investors to treat them as cash-generating blue chips rather than speculative growth assets. Furthermore, in this climate of elevated geopolitical risk, the defense sector maintains a secular appeal.

AI and Energy Infrastructure as National Security

To sustain and scale AI capabilities, immense data center power demands and grid management are required. Because AI is fundamentally a national strategic industry, the infrastructure that powers it must be viewed through a national security lens. Simply put: Without electricity, there is no AI industry.

The ‘End of War’ Declaration and Uncharted Waters

US President Donald Trump may declare victory regarding current conflicts and attempt to expedite an ‘end of war’ declaration. However, regional uncertainty has only deepened, with expectations that the Strait of Hormuz may face blockades by the IRGC.

Are we witnessing a revival of the profound uncertainties that followed the 1973 Middle East War and the 1979 Iranian Revolution? As we review today’s investment landscape, we do so with the anticipation that resilient investors will once again shine through in identifying the right opportunities amidst the storm.

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Winston Seong
Founder & CEO of THOTH Investment | Publisher of The Kairos