April 2026 Newsletter
HOW MARKETS HAVE PERFORMED (FIRST QUARTER 2026)
The first quarter of 2026 was marked by pronounced market volatility, driven by escalating geopolitical tensions in the Middle East, fresh uncertainty on global trade policy, the disruptive impact of AI on corporate business models and shifting expectations for global interest rates. Commodities, particularly oil, rose sharply, while both equities and credit delivered negative returns. Given the scale of disruption to global energy supply chains, the overall resilience of global asset markets has been notable. Gold was an outlier: after rallying 20% year-to-date through February, it fell 10% in March despite the intensifying conflict in the Middle East. Equity market sentiment in January and February was dominated by concerns over the transformative potential of AI applications. This triggered a significant re-evaluation of the outlook for software, data providers and a broad range of professional and business services. Stress subsequently spilled into private credit markets, where rising rates, questions over loan quality and redemption pressures from increasingly cautious investors prompted a number of managers to impose gating measures, reviving uncomfortable echoes of 2007. The launch of Israeli and US strikes against Iran at the start of March shifted market focus toward the potential duration and severity of the conflict. Investors weighed the possibility of a near-term resolution against the risk of a prolonged military engagement and potential closure of the Strait of Hormuz, an outcome that could push the global economy toward recession. Economic data remained broadly stable prior to the escalation of hostilities, with gradually moderating inflation and steady economic growth offsetting signs of labour market softening. The energy-driven inflation shock has since prompted a material reassessment of monetary policy expectations. At the end of February, UK markets were pricing in 0.5% of rate cuts over the year ahead. By the end of March, this had reversed to expectations of 0.5% of rate hikes, pushing gilt yields higher across the curve.
WHAT WE ARE THINKING
A broader shift toward a more multipolar geopolitical environment appears to be underway. We expect traditional alliances to face increasing strain and governments to place greater emphasis on the resilience of industrial capacity, strategic resources and national security. Against this backdrop, we believe infrastructure assets and commodities are well positioned to benefit from long term structural themes including decarbonisation, deglobalisation and rising AI related energy demand.
INSIGHTS FROM SOME OF OUR MANAGERS
Despite hostile federal rhetoric under Trump, US renewable deployment has continued to accelerate, with almost all new power capacity in 2025 coming from renewables. Notably, much of this build-out has been concentrated in lowerregulation, Republican-led states, highlighting how infrastructure availability, permitting ease and cost competitiveness can outweigh political alignment. More broadly, the historical pattern is less partisan than often assumed: renewable deployment has accelerated across both Republican and Democratic presidencies, with periods of particularly strong buildout under Republican administrations reflecting faster permitting and infrastructure expansion rather than explicit policy support.
OTHER NEWS
If we had been told in advance that a US-Iranian conflict would result in the full closure of a key global trading route, and then persist without resolution for seven weeks, how would we have expected markets to react? Certainly not by reaching new all-time highs in mid-April. One possible explanation lies in the changing composition of market participants, as discussed in a fascinating paper by Morgan Stanley, titled “Who is on the other side?”. Historically, fundamentally driven active investors play a dominant role in price discovery for stocks. Today, however, the growing influence of passive index flows and the rise of ‘noisy’ retail investors may be shifting this balance. Passive strategies, by design, must buy rising stocks whilst retail traders possess a ‘buy-the-dip’ mentality.
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