Investors may accelerate the UAE's real estate and equity markets.

Investment strategies don't necessarily need to be rethought because of current events in the Middle East. There are those who say that markets are able to anticipate the impact of war better than individuals because of the "wisdom of crowds." And the fact that markets are complex, second-order adaptive engines. If so, the immediate reaction of the markets is largely to disregard the events taking place in the Middle East. While it's too early to tell, it's worthy of headlines.

The increase in volatility is generating plenty of stories as short-term traders voice their opinions on the immediate movements in the market and what it means for investors in general. We also read about the extremes and what it means for investors. Given the backdrop of high inflation, the "rush for money" story is reinforced as the mood of "risk aversion" begins to prevail.

On the other hand, there are those who distinguish between "groupthink" and "crowdthink"; the former is made up of diverse opinions and the latter is controlled by the herd. Predictably, what gets lost between these two extremes is how the companies and assets themselves are valued. This is the critical variable that investors should always pay attention to.

Over the past 23 years, an investment in the S&P 500 alone would have resulted in an annualized return of 4.94 percent. Including dividend reinvestment, that would rise to 6.89 percent - or nearly a 40 percent increase in portfolio value. Investing in the Dividend Aristocrats Index would further increase the annualized yield by 1.14 percent, emphasizing the importance of dividends. This was done in an environment where lending rates were virtually zero. In previous periods, dividend shares were as high as 55 percent. Of course, dividends are not the only factor in stock selection; the main variable has been valuation, and this is where the impact of zero interest rates in western equity markets has been most pronounced.

With the fixed income market having significantly changed its attitude to 'term premium' valuations and mortgage rates reaching new heights, it was natural that valuations would be squeezed.

The dynamics of UAE investorsG/h3>

In the UAE and the Middle East, valuations are much more attractive. As the new earnings period begins, the case for creating superior earnings in the future only strengthens. The high returns over the past few years and in the case of IPOs clearly demonstrate this fact. This does not mean that every stock is undervalued or that markets cannot be overvalued. The case hinges on privatization, restructuring of pension schemes and the ability of companies to recognize the importance of cash flow (both for profit and in the form of distributions to investors), not only during periods of market turbulence or high inflation, but over the long term.

It is widely recognized that in Dubai and the UAE, real estate is the preferred asset for most investors. Increased liquidity as well as market coverage has largely crowded out corporate news. There is no denying the increased activity taking place in the capital markets and as momentum builds, liquidity follows. And also follow the ecosystem around it with analyst reports and media that go beyond the latest quarterly numbers.

The opportunities await

In the near term, sentiment will fluctuate depending on what happens in the Middle East. Market regressions may occur as anxiety manifests itself. But no successful investor has bet against Dubai and the UAE. Skeptics existed in the real estate market until recently, only to be replaced by those in the capital markets. These are buying opportunities, as well as defensive plays such as DEWA, and opportunities such as Aramex and Union Properties, which are plentiful in the market.

At the end of the day, valuations (whether in equities or real estate) will always be the anchor that investors should focus on.