Investment markets entered 2026 following a year of positive returns across all asset classes, but also with continued uncertainty around valuations, economic conditions, and interest rates. The first quarter of 2026 was largely defined by a strong start, with significant quarterly returns that faced some moderation in the final week of March due to concerns over inflation, oil shocks, and geopolitical tensions.
The month of January saw continued enthusiasm for AI, falling interest rate expectations and a resilient global economy helped investors look past geopolitical noise over Venezuela and Greenland as markets delivered early returns.
Global markets were broadly steady for the most part of February with uneven regional returns. The escalation of conflict in the Middle East towards the end of the month, raised concerns over oil prices and increased market volatility.
Investor returns in early March showed strength on strong earnings, but the latter half was defined by increased risk aversion, energy sector strength, and a pullback in tech-heavy indices.
The conflict in the middle east has been a topic of conversation in dealing rooms across the world. Markets do not like uncertainty, and in the recent weeks, we have seen uncertainty take a hold on equity pricing and the wider markets.
World Equities has had whirlwind start to 2026. The World Index, at the time of writing is currently down 1.7% in Euro terms year to date, representing just over a 4% slump across 1 month. This retraction in world markets is fuelled purely on market sentiments around a ceasefire in the ongoing US conflict with Iran. It is quite remarkable how influential the peace talks have been on markets over the shorter term; however, such is the nature of short-term investing. Taking a more regional perspective, the United States have absorbed quite a bit of pain, with the S&P500 down 4.4%, while Europe remains a little more stable albeit down –3.5%. UK shares have remained resilient throughout this period, sitting at +3.4%, while Asian markets have had a mixed performance with Japan returning a positive of 7.2% year to date, however, Hong Kong & China have remained relatively neutral at -0.9% & -0.5% respectively.
When we look at this performance on a fund level, an all-equity fund has returned –3.52% year to date, broadly in line with what the market index has achieved. Two leading multi-asset growth-oriented funds have had a differing start to the year, with the broadly diversified fund faring slightly worse than its concentrated counterpart, during this period of volatility, with returns of -0.15% & +0.23% year-to-date, respectively. A more conservative and passive multi-asset fund investment would have returned the investor 1.23% year to date. It is important to acknowledge a market lag, and these figures will not have contained some of the market recovery from this.
The returns during this period have truly highlighted the mental conundrum investors face; strong diversification for rocky periods with modest growth, or modest diversification for rocky period with strong growth.
While the situation in The Middle East remains fluid and is unsettling, geopolitical shocks of this type are not new. Markets have historically absorbed similar events, with volatility typically fading as the situation becomes clearer. Periods of market stress often test investor discipline, but history shows that staying invested through volatility has been a key driver of long-term success.
Despite these fluctuations, the key message is to remain cautiously optimistic with investment markets. This period of heightened volatility underscores the critical importance of a well-defined, long term investment strategy. Investors must remember that market corrections are a natural part of the economic cycle. Rather than reacting impulsively, maintaining a disciplined approach and regularly reviewing your financial plan with your advisor is paramount to weathering market noise and achieving your financial goals.
As always, if there is any content in the above that you would like to discuss in more detail, please feel free to reach out to us here at CMCC.
