Investor update: April 2026

At a glance

• March was highly eventful on the geopolitical front, with the situation in the Middle East evolving daily. The key concern for investors has been the disruption to global energy supply, the resulting spike in energy prices and subsequent concerns that this could push inflation higher.
• Financial markets have been digesting the conflict, what potentially higher inflation could mean for interest rates, and how the evolving backdrop could impact different asset classes.
• Most equity indices were down between around -7% to -10%, with energy-sensitive emerging markets among the most affected. In fixed income, yields on government bonds rose materially, with the UK 10-year gilt at one point moving 1 percentage point higher during the month before settling just below 5%.

Key economic developments

Since the initial strikes in the Middle East, the conflict has entangled most countries in the Gulf, none of whom were involved in the strikes. This has created a fast-moving, complex situation that we have been monitoring very closely.

Concerns about an energy-driven inflation scare have been the big story of the month. Short-term oil prices rose from 70 US dollars per barrel to over 100, with it briefly almost touching as high as 120 during the month. This bout of volatility in oil quickly spread into interest rates, challenging the previously held view that central banks would continue cutting rates.

Higher energy prices can feed into rising inflation through many routes. This includes:

• higher day-to-day operating costs for transport
• increased freight prices for goods
• higher costs of generating electricity from natural gas
• higher costs for products derived from petrochemicals, such as plastics.

If we look at the UK, expectations had previously been for at least two more rate cuts in 2026, with one expected at the Bank of England’s meeting in mid-March. This didn’t occur, as all members of the Monetary Policy Committee – the group at the BoE that sets the UK’s main policy rate – voted to keep it unchanged.

It is a similar dynamic in Europe, as the region is highly dependent on importing energy from the global market. The US is somewhat insulated from these energy market gyrations as it is itself a major energy producer.

If we see a material resolution to the conflict in the coming weeks, concerns about this inflation scare may quickly fade, with expectations around interest rate cuts returning. A prolonged conflict stretching several months could result in a shift higher in long-term oil prices, feeding more concerns around inflation’s return.

For more information on inflation, interest rates and investing, you can read our guide on the topic.

How financial markets have fared

Equity markets pulled back in March, reflecting the increase in volatility. As of 27 March, the S&P 500, which reflects the performance of the 500 largest listed US companies, was down around -7%. In the UK, the FTSE 100 was down about -8% and European equities closed over -9% lower. Emerging markets were also down by more than -10%, reflecting the performance of stocks in countries including China, South Korea, Taiwan and Brazil.

In bonds, we have seen yields on government bonds move higher in many markets, notably in shorter maturity bonds. Yields represent the return investors receive for holding a bond and move oppositely to bond prices. As a result of these higher yields, prices for bonds have fallen. Our assessment of fixed income is that the investment case for assets such as longer-dated government bonds remains challenging.

Focusing on the UK, the nature of the conflict has once again raised concerns about energy prices, with the potential for another intervention by the government to cap energy costs for households. However, funding support for this cap, without an increase in revenue or costs savings, will result in more debt issuance than has already been announced. This is resulting in higher yields being demanded by investors. The UK 10-year gilt at one point had moved around 1% higher during the month before settling just below 5%.

How we are managing portfolios

When a situation like this arises, we ask ourselves as an investment team if this development changes our long-term outlook across the different asset classes we invest in. We continuously assess and interrogate our positions, weighing whether portfolio changes are needed. Currently, we remain confident in our long-term views and are therefore not making any significant changes in immediate response to the conflict.

We did take the opportunity to ‘rebalance’ portfolios in the middle of the month to take advantage of the decline in prices in some asset classes. When prices change, this can provide an opportunity to add to positions with attractive entry points. We will continue to monitor the situation closely for opportunities but want to stress that this type of event is a normal part of long-term investing and one that should be viewed as part of the journey.

Putting the market movements into context

For a UK-based investor with a globally diversified portfolio allocated 60% to equities and 40% to bonds, the recent portfolio dip is well within what we have seen in recent decades.

Since 1995, for this type of portfolio, the average ‘maximum drawdown’ over the course of each year has been ~9%. The maximum drawdown, commonly referred to as the ‘max drawdown’ is the change in a portfolio’s value from its highest point (peak) to its lowest (trough) over the course of a time period. In this example, we are looking at the average annual max drawdown over the course of 30 years.

In contrast to the ~9% average max drawdown between 1995 and 2025, in 2026 so far, the max drawdown for this type of portfolio has been around -5.6%. This is well within the normal range and reflects that this type of event is a normal part of long-term investing and should be viewed as part of the journey.