Quarterly Market Review & Outlook Q1 2026

After a strong 2025, markets entered the new year with momentum still intact, and equities continued to move higher through much of January and February as underlying fundamentals remained supportive. Beneath the surface, however, the first quarter was increasingly shaped by geopolitical developments and continued scrutiny of AI‑related spending expectations and valuations, before the escalation of war in the Middle East triggered a sharp reversal in March.

Despite a near 9% pullback from peak to trough, global equities proved relatively resilient, with the MSCI World Index down 3.5% over the quarter. Earlier trends largely persisted into the start of the year, with Europe outperforming, value and cyclical sectors leading, and parts of the US market facing pressure from a more cautious reassessment of AI‑linked growth expectations. As the conflict escalated, performance became increasingly driven by differences in macroeconomic sensitivity, with energy‑import‑dependent economies underperforming as oil and gas prices surged sharply.

Fixed income markets reflected the inflationary nature of the shock. Rising energy prices pushed yields higher across major bond markets, limiting the degree of protection normally expected during periods of equity market weakness. Broader credit markets also weakened as spreads widened and risk appetite deteriorated. Within alternatives, stress became more visible in parts of the private credit market, particularly in semi‑liquid structures offering periodic liquidity against inherently illiquid underlying assets.

While geopolitical events often trigger sharp market reactions in the near term, history suggests their impact on equity markets is frequently more short‑lived than investors initially fear, particularly where the underlying economic backdrop remains intact. For long‑term investors, this reinforces the importance of avoiding decisions driven by heightened uncertainty and instead remaining focused on the compounding power of equities across market cycles.

In our Q1 2026 Market Review & Outlook, our Investment Committee assesses whether recent developments represent a lasting deterioration in economic fundamentals or a sentiment‑driven adjustment, and outlines how we continue to monitor these risks on behalf of our clients.

Click here to view the Q1 2026 Market Review & Outlook in full

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