Investment Update: Market commentary Q1 2026

It’s been a pretty noisy start to the year for markets. Middle East tensions, oil prices jumping around and inflation fears creeping back have all been in the headlines which hasn’t exactly been calming. Unsurprisingly, that’s meant more volatility for global markets.

However, if we step back and look carefully, the picture isn’t as bad as it might feel for global stock markets.

Overview

Global equities dipped slightly over the quarter, but plenty of regions actually ended up positive. Markets with strong commodity exposure held up well, helped by higher oil prices. The big laggard again was the U.S., where technology stocks were hit as investors continued to question high valuations in a world where interest rates may not fall as quickly as hoped.

Bonds didn’t offer much help either. Fixed income struggled on renewed inflation concerns and the worry that rates could stay higher for longer.

Earnings, market behaviour and inflation

One genuine positive has been earnings. Despite the ongoing challenges faced within the middle east, company results came through better than expected, and forecasts remain broadly supportive for now. That said, markets are keeping a close eye on what comes next; prolonged conflict or supply‑chain disruption could start to show up in future earnings, particularly in Europe and the UK.

In the UK, inflation has been edging lower, but higher energy prices look set to push headline inflation back up in the short term. Growth remains sluggish and the labour market is softening, though unemployment is still around fairly normal historical levels.

What’s been most reassuring is how markets have behaved. Despite some big headlines, including a temporary ceasefire announcement that sparked a relief rally, there’s been no real panic. If anything, markets seem better at dealing with uncertainty than they used to, which reinforces the point that knee‑jerk reactions rarely pay off.

Our approach

Overall, our view hasn’t changed. We remain cautious, but quietly optimistic on equities. Valuations look more interesting after recent falls, earnings are holding up, and taking an active, diversified approach still makes sense. Volatility isn’t going away but for now, markets are coping, our investment management partners continue to keep a close eye on market developments to ensure our strategies remain well positioned to handle this challenging environment.