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Our market summary
The second quarter of 2026 marked a sharp turnaround for investors, find out more by reading our market summary.
Performance review
The Cirilium Passive Portfolios delivered positive returns over the second quarter of 2026, with returns ranging from 5.0% for the Conservative Passive Portfolio, through to 13.3% for the Adventurous Passive Portfolio. All the portfolios outperformed their respective IA performance comparators. Expectations of a resolution of the conflict between the US and Iran, combined with a more positive outlook for AI related companies led to significant returns for equities which were the key driver of returns for the portfolios. Diversifiers (non-equity assets) were also positive contributors, with lower yields and tightening credit spreads driving performance for fixed income markets, while the alternatives allocation was also positive.
The performance figures shown refer to past performance. Past performance is not a reliable indicator of future performance.
Equity
How our equity holdings performed
Risk sentiment rebounds
A ceasefire announcement to the US-Iran conflict made in early April allowed markets to focus on corporate earnings reports through April and May, which demonstrated continued strength in AI-related companies. The earnings of the top 500 US companies were up some 29% year-on-year with companies like Nvidia and Intel continuing to deliver earnings per share growth rates in excess of 100% year-on-year.
Asia gets AI fever
US companies were not the only AI beneficiary with South Korean stocks Samsung and SK Hynix among the big winners in the second quarter. This helped push emerging market equities up by 23.4% over the quarter, surpassing the 14.1% return generated by US equities. Both regions were our top contributors within equities, with the US the largest driver given its larger weight in the portfolios.
Style rotation
It was a different story for the UK and developed Pacific ex Japan equities, which were laggards over the second quarter, as the market focus moved away from the energy-related names which had led performance in Q1. While other regions were able to deliver returns of more than 10%, the UK and Pacific ex Japan were up 4.2% and 3.1%, respectively. This meant they were the smallest contributors over the period (even though the UK is the second largest region by asset allocation).
Fixed income
How our fixed-income holdings performed
Rate repricing
UK bond yields fell over the period, helping drive higher returns for the Vanguard UK Investment Grade Bond Index Fund and the Amundi Core Global Government Bond ETF. Returns in the global government and corporate bond funds were lower as markets started to price nearer term interest rate hikes in the US and Japan, given ongoing concerns around higher inflation.
Alternatives
How our alternatives holdings performed
Alternatives continue to deliver
Our alternatives holdings were positive contributors with the State Street Global Alternative Beta Fund and the Goldman Sachs Absolute Return Tracker Portfolio delivering positive returns of 3.8% and 7.6%, respectively.
Portfolio activity
Following the spike in market volatility caused by the US-Iran conflict in March, we had reduced our equity beta before adding back to risk assets in early April. Anticipating another strong earnings season for US technology companies, we established a modest growth overweight to help offset our broader underweight to the largest growth companies. We also increased our emerging market equities allocation on the back of sustained earnings momentum, while exiting our healthcare overweight due to weaker earnings delivery. In fixed income, we introduced an underweight to government bonds and further increased our underweight to UK government bonds.
New holdings
- Invesco MSCI North America Swap ETF
This exchange traded fund tracks the MSCI North America Index, which is used in our strategic asset allocation. - Invesco Global Government Bond ETF
This exchange traded fund tracks the Bloomberg Global Aggregate Treasuries Index, which is used in our strategic asset allocation.
Investment outlook
Markets have enjoyed an exceptional run, driven by enthusiasm around AI, resilient economic growth, and a corporate earnings backdrop that continues to exceed expectations. However, after such strong returns, it is worth ensuring the fundamental case remains sound. Below are some factors that we are considering.
How much should you pay for high growth?
Valuations look expensive across most major equity regions, although this is partly justified by the strength of corporate fundamentals. Earnings continue to rise, growth forecasts remain robust, and profit margins have proven remarkably resilient. The key challenge is that expectations are now extremely high. As the upcoming earnings season begins, companies will need to deliver another round of strong results to justify current valuations.
Digestion issues
Momentum remains supportive, but signs of crowding are beginning to emerge. A few blockbuster IPOs (including the recently listed SpaceX) will increase equity supply just as investor positioning in AI-related themes appears increasingly full. New issues need funding and when lockups expire it may create additional selling pressure if founders and early investors rush for the exit.
Expectations and outcomes
From a macroeconomic perspective, markets appear very relaxed about inflation risks. Effects of the US-Iran conflict have been assumed as temporary, and bond markets appear confident that inflation will continue to moderate. However, the events of 2022 demonstrated that macro shocks can take time to feed through the system. For now, markets are pricing a benign outcome which risks disappointment.
Portfolio managers
Ian Jensen-Humphreys
Portfolio Manager
Sacha Chorley
Portfolio Manager
CJ Cowan
Portfolio ManagerSolutions
View the full range of multi-asset investment solutions offering a choice of outcomes at different risk and diversification levels.
Important Information
The value of investments can fall as well as rise. You might get back less than you invested.
This communication is issued by Quilter, a trading name of Quilter Investment Platform Limited
The Quilter Investors Cirilium Conservative Portfolio, Quilter Investors Cirilium Balanced Portfolio, Quilter Investors Cirilium Moderate Portfolio, Quilter Investors Cirilium Dynamic Portfolio, and Quilter Investors Cirilium Adventurous Portfolio are sub-funds of Quilter Investors Cirilium OEIC, an investment company with variable capital incorporated in England and Wales. Quilter Investors Cirilium OEIC is authorised by the Financial Conduct Authority as a non-UCITS retail scheme and can be distributed to the public in the United Kingdom.
Approver: Quilter July 2026
QIP 24004_25_16143
