As we conclude the first quarter of 2026, the prevailing market sentiment can be described as one of watchful resilience. While headlines have been dominated by renewed tensions in the Middle East and shifting rhetoric from the United States, our core investment approach remains unchanged. We continue to focus on diversification and on investing in high‑quality businesses that are capable of navigating a wide range of economic conditions.
Events through March have, at times, unsettled markets, with sharp reactions to developments involving Iran and the Strait of Hormuz. This has created a more sensitive backdrop, particularly in energy markets, where oil prices moved materially higher over the quarter, rising well above $100 per barrel. Higher energy prices acted as a headwind for global markets, adding to inflationary pressures and reducing expectations for interest rate cuts from global central banks.
Encouragingly, there are increasing signs that all parties recognise the risks of escalation and are seeking a workable resolution. Recent commentary towards the end of March suggested a preference for an “off‑ramp” to ease tensions, which – if realised – would likely be welcomed by markets. With US midterm elections beginning to come into sharper focus, there is also a growing political incentive to avoid a prolonged conflict, particularly given the risk that geopolitical tensions could weigh on economic confidence. As ever, periods such as these tend to generate short‑term volatility but rarely alter the long‑term trajectory of well‑positioned businesses.
One of the more encouraging aspects of the quarter has been the steady performance of the UK market. Despite global uncertainty, FTSE 100 companies have demonstrated quiet resilience, supported by well‑capitalised banks and a continued focus on balance sheet discipline. More defensive areas of the market, such as pharmaceuticals, have performed well, benefiting from stable earnings and strong cash flows, while energy companies have been supported by firmer commodity prices.
In a world where US equity markets remain relatively concentrated and, in some cases, more fully valued, the UK continues to offer a compelling combination of stability and attractive long‑term value.
Elsewhere, infrastructure and other real assets have continued to play an important role in providing stability and income. These investments, which include essential services such as utilities and energy networks, offer a degree of predictability that is particularly valuable during periods of heightened uncertainty. Despite a modest recent correction, gold has historically performed well during periods of geopolitical stress and in more inflationary environments.
There has been a broader and more varied pattern of returns across global markets. While US equities have been driven by a relatively narrow group of companies, other regions – including Europe and Japan – are beginning to present more attractive opportunities. This reinforces the importance of maintaining a well‑diversified, global approach.
Within fixed income, short‑dated discounted gilts continue to offer highly attractive tax-adjusted returns, with gross equivalent yields of around 7% for higher and additional rate taxpayers, reflecting the favourable capital gains treatment.
Within technology, the artificial intelligence theme has continued to evolve. The market is increasingly differentiating between more speculative areas and those companies providing the core infrastructure underpinning long‑term technological development. Larger, well‑capitalised businesses with strong cash flows are typically best placed to benefit sustainably from this structural trend.
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The value of securities and the income from them can fall as well as rise. Past performance should not be seen as an indicator of future returns. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities.
