Monthly Investment Briefing: We Remain Cautious

March 2026 Market and Economic Review

March was one of the most volatile months for global markets in recent memory, driven by a sharp escalation in geopolitical tensions. The U.S.– Israeli military campaign against Iran, launched at the end of February, triggered a rapid global equity sell‑off that erased an estimated $7 trillion in value. Brent crude surged nearly 60% over the month, its largest monthly rise on record and even more severe than the 1990 Kuwait crisis. Traditional safe‑haven assets failed to offer protection, creating an unusually dislocated environment for investors.

Goldman Sachs now assigns a 30% probability of a U.S. recession should the energy shock continue.

Key Economic and Geopolitical Developments

• Inflationary Pressures Intensify

The near‑closure of the Strait of Hormuz disrupted around one‑fifth of global seaborne oil and gas flows, pushing Brent above $115 per barrel and nearly doubling European natural gas prices. Rising fertiliser, shipping, and petrochemical costs fed directly into inflation expectations, reversing earlier hopes of easing pressures.

• Safe Havens Struggle

Gold fell 12% in one of its weakest monthly performances in decades, while the Yen and Swiss Franc offered limited downside protection. The U.S. dollar strengthened on its net‑energy‑exporter credentials, while energy‑importing emerging markets such as India and South Korea saw meaningful currency weakness. Energy producers, however, remained relatively resilient.

• Monetary Policy Repricing

Markets rapidly reassessed rate expectations, shifting from anticipating several Fed cuts to accepting the possibility of a rate hike. The U.S. 10‑year Treasury yield moved above 4.3%. European inflation expectations rose in parallel, with German CPI now expected to increase from 1.9% to 2.7%, while UK markets priced additional Bank of England tightening.

• Policy & Politics

President Trump maintained pauses on further strikes against Iranian energy infrastructure as diplomatic negotiations continued. The WTO’s 14th Ministerial Conference underscored rising global protectionism, while Germany signalled openness to a longer‑term EU–China trade arrangement amid growing tension with the U.S.

Outlook for Q2 2026

The central question for Q2 is whether the Iran conflict stabilises or escalates. Most analysts expect hostilities to persist into June, with the normalisation of Persian Gulf oil and LNG exports potentially delayed until July due to disrupted Arab production and damaged Qatari infrastructure. Oil prices may remain elevated, with a prolonged shutdown of the Strait of Hormuz risking a move towards $150 per barrel.

Goldman Sachs now assigns a 30% probability of a U.S. recession should the energy shock continue. The Federal Reserve faces a difficult balancing act amid rising stagflation risks, and Chair Powell is likely to remain hawkish unless labour markets soften. U.S. equities trade at discounts to intrinsic value, but momentum indicators have weakened. We remain cautious until oil markets stabilise, shipping conditions improve, and the Fed’s policy direction becomes clearer.

March 2026 Portfolio Activity

• European Equities: We sold Novartis near all‑time highs ahead of a significant patent cliff.
• U.S. Equities: We added NextEra Energy and Danaher, taking advantage of volatility to gain high‑quality exposure to our themes.
• Emerging Markets: We trimmed Bennbridge Global Emerging Markets Fund due to concentration risk, with plans to rotate into another emerging market strategy without the same concerns.
• Technology: We sold Polar Capital Technology Trust near all‑time highs following a strong multi‑year run and increased AI‑related pressures.
• Alternatives: We re-entered Trium ESG Emissions Impact Fund, reflecting renewed emphasis on energy‑linked themes.

Portfolio Positioning

We enter April underweight equities, with elevated liquidity and a defensive tilt. Given the likelihood of continued geopolitical and market volatility, this positioning provides flexibility to deploy capital into high‑quality opportunities as conditions stabilise.

Will de Baer-Investment Director, DCIO