1st Quarter 2026 Market Update

I hope this update finds you well.

It’s been an interesting start to the year. While markets have been a little more unsettled compared to the strong finish we saw in 2025, this is very much part of the normal rhythm of investing.

A mix of global events and shifting expectations around interest rates has created some short-term volatility, but it’s worth remembering that periods like this often follow stronger runs and can present opportunities over time.

Encouragingly, many of the longer-term drivers of growth – including innovation in areas such as technology – remain firmly in place, even if markets take a pause along the way.

As always, we’ll continue to keep a close eye on developments and ensure your plans remain on track.

Below is our look back at the first quarter of 2026. As ever, please do get in touch if you have any questions or if we can help in any way.

Global Shares

Global equity markets declined over the quarter, with developed markets leading the falls. Ongoing weakness in US technology stocks, combined with increased uncertainty linked to the conflict in the Middle East, weighed on sentiment.

Japan was a notable exception, delivering positive returns following supportive political developments earlier in the quarter. Emerging markets held up relatively better, supported by early strength in technology-focused regions such as Korea and Taiwan.

US Markets

US markets were volatile, with the S&P 500 falling around 4% over the quarter its weakest period since 2022.

The year began positively, supported by a strong labour market, steady consumer spending, and easing inflation. Markets even reached record highs in January. However, concerns soon grew that stronger economic data could delay interest rate cuts.

Geopolitical tensions then took centre stage. Escalation in the Middle East disrupted oil supply routes and pushed energy prices higher, leading to a shift in investor sentiment and a pullback in equities.

Energy and basic materials were the strongest sectors, benefiting from higher commodity prices. In contrast, parts of the technology sector particularly software struggled. While demand linked to artificial intelligence remains strong, investors have become more selective, favouring infrastructure related areas such as semiconductors and data centres over traditional software businesses.

Eurozone

European markets declined, particularly towards the end of the quarter as geopolitical tensions escalated.

Energy stocks performed well on the back of higher oil prices, while more economically sensitive sectors such as consumer discretionary came under pressure. Within technology, performance was mixed hardware and semiconductor companies held up better than software businesses.

Rising energy prices also clouded the outlook for interest rates. While inflation had been easing, it ticked higher again in March, and the European Central Bank signalled it may need to act if price pressures persist.

UK

UK equities delivered a modest positive return, supported by the market’s exposure to energy and natural resources, as well as a weaker pound which benefited internationally focused companies.

Energy, basic materials, telecommunications, and healthcare performed well, while technology and consumer-focused sectors lagged. Larger companies outperformed more domestically focused mid-sized firms.

The outlook for interest rates shifted during the quarter. Earlier expectations for cuts gave way to a more cautious stance, with the Bank of England holding rates steady and signalling that further increases may still be possible given inflation risks.

Japan

Japanese equities posted gains overall, helped by political stability following February’s election results and expectations of supportive economic policies.

However, like other markets, Japan saw a pullback in March as global concerns around energy prices and geopolitical risks increased. The Bank of Japan kept rates unchanged but highlighted the potential inflationary impact of higher energy costs.

Emerging Markets

Emerging markets delivered slightly negative returns but still outperformed developed markets overall.

The quarter was split into two distinct phases. Early strength, particularly in Korea and Taiwan, was driven by demand for AI-related technologies and a weaker US dollar. However, this momentum reversed in March as higher energy prices and geopolitical uncertainty weighed on sentiment.

Latin American markets such as Brazil, Peru and Colombia performed well, supported by commodity strength. In contrast, India lagged due to growth concerns and sensitivity to higher oil prices. China also struggled, with ongoing concerns around growth and its property sector.

Asia (ex-Japan)

Asia ex-Japan markets declined overall, with strong early gains giving way to sharp falls in March.

Technology-heavy markets such as Korea and Taiwan benefited initially from AI-related demand but were later hit by concerns around rising energy costs. Other markets showed mixed performance, with some supported by improving domestic conditions, while others were weighed down by global trade and growth concerns.

Bonds

Bond markets had a difficult quarter, with yields rising across most major regions as inflation concerns resurfaced.

Higher oil prices and geopolitical tensions led investors to reassess the outlook for interest rates, with markets beginning to price in the possibility of further rate increases rather than cuts.

US government bonds were relatively more resilient, while UK and European bonds came under greater pressure. Central banks broadly held rates steady but adopted a more cautious tone given the changing inflation outlook.

Corporate bonds held up better, with US credit markets outperforming their European counterparts.

Commodities

Commodities were the standout performer during the quarter, driven primarily by energy.

Oil prices surged as conflict in the Middle East disrupted supply routes, particularly through key shipping channels. This supported strong gains across the energy sector and benefitted commodity-exporting regions.

Other areas such as industrial metals and agriculture also saw positive returns, while precious metals were more mixed, with some profit-taking towards the end of the quarter.