https://t.co/zuaMLKvyCn Resurgent U.S.-Iran Tensions: How Should Investors Prepare? | Emerging Markets Polariss 2026.7 Pictet Japan Co., Ltd. #AISummary U.S.-Iran Geopolitics and the Investment Strategy of Emerging Markets Polariss 🔳 Theme of This Report As uncertainty surrounding U.S.-Iran relations intensifies again, this report explains how investors should prepare. 🔳 Trends in Three Key Asset Classes Year-to-date, emerging market bonds have risen slightly, and emerging market equities have gained, while gold has declined; recently, both emerging market equities and gold have weakened. 🔳 Relationship Between Gold and Oil During periods of heightened tension in Iran, WTI crude oil futures tend to rise while gold falls—showing a notable inverse correlation. 🔳 Reasons for Gold’s Decline Rising expectations of U.S. interest rate hikes have pushed up real yields and the U.S. dollar index, with the stronger dollar acting as a downward pressure on gold prices. 🔳 Diversification Benefits of Gold Even though gold prices are currently weak, the diversification benefits gold provides have not disappeared. 🔳 Gold During Market Corrections During past crises—including the Lehman Shock, China Shock, global equity sell-off, and COVID-19 shock—global equities declined while gold posted positive returns, demonstrating its diversification power. 🔳 Importance of Long-Term Diversification Because equities, bonds, and gold exhibit different price movements, combining them over the long term holds significant value. 🔳 Decline in Emerging Market Equities Between June 30 and July 20, sharp declines in Taiwanese and South Korean stocks dragged down the broader emerging market equity class. 🔳 Correction in South Korean Equities The drop in South Korean stocks is largely viewed as a correction following a substantial prior rally. 🔳 Earnings Outlook for South Korean Companies EPS forecasts for major firms continue to rise steadily, with upward revisions to earnings expectations also increasing. ListItemIcon Projected P/E ratios have fallen to the low 5x range; despite recent price gains, stocks are not considered overvalued. ListItemIcon Outlook for Emerging Market Equities Earnings prospects remain strong, and over the long term, equity prices may revert to fundamentals-driven movements. ListItemIcon Investor Core Principle Even amid U.S.-Iran uncertainty, it remains critical to avoid overconcentration in any single asset class and maintain broad diversification across equities, gold, and bonds. ListItemIcon Net Asset Value Trend Since its inception on September 29, 2023, Emerging Markets Polariss has generally trended upward through June 30, 2026. ListItemIcon Performance Record As of June 30, 2026, the net asset value stood at ¥16,796, delivering a cumulative return of 68.0% since inception, or an annualized return of 20.7%. ListItemIcon Investment Universe Emerging Markets Polariss employs a diversified strategy allocating across emerging market equities, gold, and emerging market bonds. ListItemIcon Interest Rates and Asset Allocation When interest rates are extremely low, the strategy emphasizes equities and gold; when rates are high, bond allocation is increased. ListItemIcon Current Asset Allocation Gold: 23.4%, Equities: 43.5%, Bonds: 13.1%, Cash: 20.1%. ListItemIcon Reason for High Cash Allocation The elevated cash position was temporary due to ongoing portfolio rebalancing; cash is planned to be reallocated to equities and gold in the near term. ListItemIcon Response During Periods of Uncertainty During times of heightened market uncertainty, the fund has temporarily increased its allocation to relatively lower-risk bonds. ListItemIcon Response to Exchange Rate Movements Given historical trends showing yen appreciation during uncertain periods, the fund has also temporarily increased its yen-denominated asset allocation. ListItemIcon Current Investment Judgment The fund now considers the heightened risk environment to have subsided and is seeking to reduce bond holdings to increase allocations to equities and gold. ListItemIcon Role of Bonds Although bond allocation will be reduced, bonds will not be eliminated entirely due to their role in smoothing portfolio volatility. ListItemIcon Continuity of Investment Strategy The core principle of balanced diversification across equities, bonds, and gold remains unchanged. ListItemIcon Risk and Return Profile Emerging Markets Polariss is classified as a mid-risk product in terms of risk-return profile. ListItemIcon Risk Reduction Through Diversification By combining gold and bonds with volatile emerging market equities and bonds, overall portfolio risk has been contained at 12.8%. ListItemIcon Final Conclusion Investors should view U.S.-Iran uncertainty as a potential opportunity while maintaining broad diversification across equities, bonds, and gold—avoiding overconcentration in any single asset.