Investor update: March 2026

At a glance

• The US equity market delivered lower returns than other regions, while performance was strong in Japan, Europe, the UK, and emerging markets – with China a notable exception
• In fixed income, bonds performed positively, supported by encouraging inflation data on both sides of the Atlantic, which could support reductions to interest rates
• The market’s broadly positive response to the nomination of Kevin Warsh as the next chair of the Federal Reserve was a noteworthy theme in February
• We increased our gold exposure and modestly reduced US equity exposures in order to tactically increase our allocations to the UK and Japan.

What happened in financial markets in February?

Equity markets were overall positive in February, with fairly large dispersion between regions.

The US equity market – by far the largest in the world and in our portfolios – delivered lower returns than other regions. The S&P 500 was slightly negative for the month, losing less than 1%, a trend that was driven by technology stocks, particularly software. The Nasdaq declined by around 2% in February. In contrast, US small caps, supported by the prospect of lower yields, rose by approximately 2% during the month.

Elsewhere, performance was strong in Japan, Europe, the UK, and emerging markets – with China a notable exception. Looking more closely, emerging markets excluding China outperformed, finishing the month up by about 10%, led by Taiwan and South Korea. Taiwan and South Korea are both performing well due to the rise of artificial intelligence.

Closer to home, the UK had a strong month – particularly among large cap stocks – with the FTSE 100 climbing by around 7%, supported by healthcare and commodity-linked sectors such as energy and materials.

In fixed income, bonds performed positively, supported by encouraging inflation data on both sides of the Atlantic, which could support reductions to interest rates. In the UK, the bond market responded well to a record budget surplus of over £30bn which helped to ease concerns over public finances and deficit risks.

Among other asset classes, the US dollar – often a useful barometer – appreciated in February, partially recovering from a particularly weak January, while gold continued to shine despite heightened volatility. The price of gold is up by more than 20% since the start of the year.

What drove markets?

The quarterly earnings season was a key moment in February, highlighting the excellent health of US corporates overall.

US companies reported year-on-year earnings growth of around 13% for the last quarter, which was notably above the approximate 8% growth that analysts had expected before the season began.

This was accompanied by almost record profit margins for US corporates, which compare very favourably with the rest of the world. This strong earnings season – and the underlying strength of US companies – remains a key pillar of our confidence in US equities over the medium-term.

While US valuations remain elevated versus other regions, the market’s capacity to innovate and generate profits is second to none, in our view, making US equities attractive for investors over a medium-term horizon. Investors tend to define a medium-term horizon as between three to ten years.

Another notable theme in February was the market’s perception of the new Federal Reserve chair, Kevin Warsh, whose nomination was viewed quite positively as investors considered how he will manage policy.

On the one hand, being nominated by President Donald Trump, he will be expected to be supportive of lower interest rates; on the other, during his tenure on the Fed Board from 2006 to 2011, he was regarded as relatively hawkish on inflation risks, favouring action to curb inflation that could include rate hikes. Our view is that he will remain broadly balanced in his approach, and it would take a meaningful reacceleration in inflation to reverse the path to lower interest rates this year.

On the geopolitical front, while it was a much quieter month than January with respect to the US and Greenland, the rising risk of conflict between the US and Iran effectively materialised after the market closed for the month. The initial impact was on the oil market and other risky assets, although the market reaction was somehow muted. The impact on global trade will depend on the evolution of the conflict. 

How are we positioning portfolios?

We made selective changes across our portfolios in February. First, we used volatility in the price in gold to increase our gold exposure across our portfolio styles.

We took advantage of this heightened volatility to execute at what we view as a decently attractive entry point. We do not plan any further increases in gold in the coming months.

Secondly, towards the end of the month we modestly reduced US equity exposures in order to tactically increase our allocations to the UK and Japan. While the US remains attractive over the long term, near-term headlines – particularly around software, uncertainties related to AI, and still elevated US valuations – led us to adjust our allocations modestly.

We increased our allocation to the UK because of its higher exposure to the commodity sector, and added exposure to Japan, in response to political developments and the new prime minister Sanae Takaichi, whose expected economic management follows in the footsteps of her mentor Shinzo Abe, which we think will likely be favourable to Japanese equities. It is important to note the increased equity allocation was made with currency hedging, to reduce any impact of the Yen underperforming other developed market currencies. Currency hedging refers to the management of currency exposure, or currency risk, associated with owning foreign assets.

About this update: All figures, unless otherwise stated, relate to the month of February 2026.

Sources: MacroBond, J.P. Morgan Personal Investing and Bloomberg.

Risk warning

As with all investing, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. Past performance and forecasts are not a reliable indicator of future performance. We do not provide investment advice in this update. Always do your own research.