According to APP, Capital Economics stated in a recent report that if the ceasefire does ultimately lead to an end to the war, the conflict will have little impact on investor risk appetite in the US market. Capital Economics' head of Asia-Pacific markets pointed out that although market sentiment has improved since the ceasefire, uncertainties remain, such as how the Strait of Hormuz will reopen. Nevertheless, investor risk appetite has not changed substantially, with key risk premium indicators such as the S&P 500 excess earnings yield and the 10-year Treasury term premium rising only slightly. Capital Economics suggests this may reflect the market's perception that the Trump administration is willing to avoid escalation under market pressure. Nevertheless, analysts warn that deeper geopolitical divisions could be structural, supporting a broader repricing of risk in the medium term.

This latest statement from Capital Economics' Head of Asia Pacific Markets aligns closely with the firm's recent series of analyses on the impact of the Middle East situation on global asset pricing. It emphasizes that while the ceasefire agreement has brought short-term sentiment improvement, the details of policy implementation still need continued market validation. Current data shows that the S&P 500's excess earnings yield has risen slightly to approximately 1.71%, while the 10-year Treasury term premium has risen to approximately 0.67%. Both changes are within a moderate range, indicating that investors have not significantly adjusted their portfolio structures due to the easing of geopolitical tensions.

From a deeper perspective, the limited impact of this ceasefire on risk appetite stems primarily from three factors. First, the market had already priced in some geopolitical risk premiums, making the ceasefire news more of a confirmation than an unexpected positive development. Second, the Trump administration's flexible response during previous market volatility further strengthened investors' confidence in the policy buffer, preventing panic selling. Finally, the relatively robust US economic fundamentals, coupled with upward revisions to corporate earnings expectations, jointly supported the resilience of risk assets. However, Capital Economics also cautions that the structural divergences exposed by the Middle East conflict—including energy security and supply chain restructuring—may continue to impact global capital flows in the medium term, leading to a more persistent repricing of risk premiums.
To visually demonstrate the latest changes in key risk premium indicators, the following table presents a comparison of recent data:

The table clearly shows that despite the ceasefire agreement being implemented, the risk premium indicator only showed a mild adjustment, confirming Capital Economics' core judgment that the impact was "minimal".

Overall, this report provides investors with an important framework for observation: In the short term, with a window of geopolitical easing, stable risk appetite is conducive to the continued recovery of the stock market, but medium-term structural risks still require close attention. The market will continue to assess the actual progress of the reopening of the Strait of Hormuz, energy price trends, and subsequent statements from the Trump administration; these factors will collectively determine the next direction of the risk premium's evolution.

Editor's Summary <br/>Capital Economics report highlights the limited marginal impact of the Middle East ceasefire on risk appetite in US capital markets. A slight adjustment in risk premium indicators reflects market confidence in the flexibility of the Trump administration's policies. However, structural geopolitical divergences may drive broader risk repricing in the medium term, requiring investors to maintain a dynamic balance between short-term sentiment recovery and long-term uncertainty.