Monthly Review and Outlook March 2026

Global equity markets came under pressure in March, with declines broad‑based across regions. Energy was a notable exception, benefiting from higher oil prices amid geopolitical tensions.

• United States: US equities fell over the month, with only the energy sector posting positive returns. Industrials and healthcare were among the weakest performers, reflecting concerns that rising input costs and slower growth could pressure profits. Elevated energy prices added to inflation concerns, reinforcing expectations that the Federal Reserve would remain cautious about easing policy.
• Europe: Eurozone shares also declined. Energy was the sole sector to record gains as higher oil prices lifted earnings expectations. Inflation jumped to 2.5% in March from 1.9% in February, increasing concerns about the region’s exposure to energy price shocks and complicating the outlook for monetary policy.
• United Kingdom: UK equities fell in line with global peers. The energy sector delivered a strong gain, reflecting the sharp increase in oil prices, but this was not enough to offset weakness elsewhere. The Bank of England kept interest rates on hold, citing the risk that higher energy costs could push inflation higher. This marked a shift from expectations earlier in the year that policy easing could begin soon.
• Japan: Japanese equities experienced a sharp decline. Market movements were driven largely by external factors rather than domestic fundamentals, including rising energy prices, escalating geopolitical tensions and some unwinding of yen‑funded carry trades, which weighed on risk‑sensitive assets.
• Emerging Markets: Emerging market equities underperformed developed markets, falling sharply over the month. Energy‑importing countries were particularly affected by rising oil prices, with Korea among the weakest performers. India also lagged, as higher energy costs, supply‑chain disruptions and increased global risk aversion weighed on sentiment.

Fixed income markets were volatile in March, with rising yields driving negative returns across most regions.

Government bond yields increased, particularly at the short end of the curve, as markets priced in the risk that energy‑driven inflation could delay interest‑rate cuts or even prompt a more restrictive stance from central banks. The US Federal Reserve kept the federal funds rate on hold at 3.50–3.75%, signalling that further progress on inflation would be required before considering policy easing.

European government bonds underperformed US Treasuries, reflecting concerns about the region’s sensitivity to higher energy prices. UK gilts were among the weakest performers, with the Bank of England adopting a more hawkish tone and all nine MPC members voting to keep rates at 3.75%.

Toward the end of the month, yields retraced slightly as investor focus began to shift from inflation risks to concerns about economic growth, although this was not enough to offset earlier losses.

Credit markets proved more resilient. US investment‑grade credit performed broadly in line with government bonds, while European credit markets underperformed. High‑yield bonds followed a similar pattern, with US markets holding up better, partly due to their exposure to the energy sector.

Commodity markets delivered strong gains in March, led by energy. Oil prices rose sharply amid escalating geopolitical tensions and supply concerns related to ongoing conflict in the Middle East.

Precious metals declined over the month, as rising bond yields and expectations of higher interest rates reduced their appeal, despite increased geopolitical uncertainty.

Looking ahead, we expect market volatility to remain elevated in the near term. Geopolitical tensions and rising energy prices have reintroduced inflation risks at a time when markets had been increasingly confident about the prospect of interest‑rate cuts later in 2026.

While underlying economic conditions remain broadly supportive, higher energy costs could weigh on growth if they persist, particularly in energy‑importing regions. Central banks are likely to proceed cautiously, balancing the need to contain inflation against emerging concerns about slowing activity.

We continue to emphasise the importance of diversification across asset classes, regions and sectors. Periods of heightened uncertainty can create short‑term challenges, but they can also reinforce the value of maintaining a long‑term investment perspective and a well‑balanced portfolio.

Forecasts of future performance are not a reliable guide to actual results, neither is past performance a reliable indicator of future results. The value of investments and the income from them can fall as well as rise and are not guaranteed, and the investor might not get back their initial investment.

Any views expressed are our in-house views as at end-March 2026. Investment markets and conditions can change rapidly, and the views expressed should not be taken as statements of fact nor relied upon when making investment decisions. This content may not be used, copied, quoted, circulated or otherwise disclosed (in whole or in part) without our prior written consent.

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