Q1 market commentary 2026

It was a volatile quarter with a mix of strong markets in January and February, offset with the start of the US/Iran conflict which has caused impact throughout March. The sharp rotation from markets anticipating rate cuts as inflation coming back closer to the central banks target was reversed, with inflation concerns and rates being higher for longer.

The domestic market

The UK market, as measured by the Morningstar UK All Cap Target Market Index, was up by 2.81% as the heavier weighting to Energy helped in March.  Many of the large international companies operating in the UK have benefited from currency devaluation. The Bank of England (BoE) held interest rates as potential inflation concerns resurfaced following the outset of the US/Iran conflict.  Corporate earnings remain strong at this stage, and we will continue to engage with companies should inflationary pressure come through from the conflict.

What about the USA?

The US market has had a volatile quarter as concerns around AI and earnings relative to valuations caused concern, alongside the events in the middle east. The dollar rallied as a traditional safe haven in risk-off environments.  There was also a strong sell-off in some of the software names, as concerns that new AI capabilities would have an impact on margins moving forward.

What’s happening in Emerging Markets and Asia?

Emerging Markets and Asian markets have had a volatile as positive AI sentiment boosted stocks in Taiwan and Korea prior to the middle east conflict, which was offset in March as concerns grew around the amount of energy exports coming through the strait of Hormuz (more than 80% of exports coming from this region). India and China struggled throughout the quarter, with a combination as an oil importer alongside some growth concerns, and high valuations were impacted.

ASAM’s outlook

Looking at the investment outlook for the long term, we continue to focus on fundamentals and what drives investment returns over investment time frames. Many short-term markets movements are sentimental and reactionary without long term consideration of how individual companies are performing and adapting to the economic environment. The dislocation in markets presents opportunities for active management. Our portfolios remain blended and diversified throughout regions/sectors and asset types and will perform different roles in the portfolios over investment time frames. We continue to focus on longer term drivers of asset class return and not trying to second guess short term sentiment or be too reactive to macro/geopolitical events.

Our full market commentary for Q1 2026 can be accessed here.

This information is obtained from sources considered reliable, but its accuracy and completeness is not guaranteed by Anderson Strathern Asset Management Limited. Neither the information nor any opinions expressed constitute financial advice. Investments can fluctuate in price, value and/or income and may return less than the original amount invested. Past performance is not necessarily a guide to future performance. Anderson Strathern Asset Management Limited is authorised and regulated by the Financial Conduct Authority.

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