Cash seen as preferred asset amid Middle East crisis, says strategist

Amid the ongoing conflict in the Middle East, Peter Berezin, Chief Global Strategist and Director of Research at BCA Research, has suggested investors focus on assets that can better withstand heightened uncertainty around the global economic outlook.

In an interview with David Lin published on April 2, Berezin said cash is the best bet for now, advising against equities even as stocks have retreated since the conflict between the U.S. and Israel against Iran began in late February.

Why cash over equities

Berezin pointed to equity valuations that remain elevated, noting that forward earnings are priced at about 20 times and that profit margins are near peak levels. In his view, this combination leaves markets vulnerable to a dual downside scenario in which both valuation multiples and earnings could decline.

He said the risk is particularly relevant for the tech sector, where profit margins could start to fall. Against that backdrop, he recommended keeping extra liquidity rather than taking aggressive equity exposure.

“I like cash right now. There’s just a lot of risk out there. Stocks have gotten cheaper compared to where they were earlier this year. … So, there’s a risk that not only does the P multiple come down, but there’s a risk that those huge profit margins, especially in the tech sector, start to decline. … I would say keep a little bit extra cash on hand,” he noted.

Recession risks and key drivers

Berezin also warned that the conflict could translate into broader macroeconomic stress, including the possibility of a recession. He estimated recession risks at about 40% in the United States and around 50% in Europe and Japan.

While those probabilities are elevated, he said they do not necessarily mean a downturn is inevitable. He cited several potential supports for the global economy, including easing oil prices if the conflict stabilizes, incoming fiscal stimulus for U.S. households, and potential tariff reductions.

He added that central banks may have room to cut rates if inflation eases alongside falling energy costs. Additional support could also come from stimulus in Germany and China.

Two conditions for avoiding a downturn

In Berezin’s assessment, avoiding a recession would depend largely on two factors: a resolution to the oil shock and continued strong investment in artificial intelligence.

He said a slowdown in AI-related capital expenditure would significantly raise recession risks, regardless of how energy markets evolve.