Market summary – Review of Q1 2026

US equities declined by 2.6% over the quarter. Early optimism, driven by solid economic data and strong corporate earnings, faded as concerns grew about interest rates staying higher for longer. Tech stocks were a key drag, particularly software companies, as investors questioned the long-term impact of artificial intelligence (AI) on business models. Rising oil prices and heightened geopolitical uncertainty further weighed on market sentiment later in the quarter.

European equities fell by 2.1% as the Middle East conflict intensified. Higher energy prices created concerns about inflation and economic growth, particularly given Europe’s reliance on energy imports. While energy stocks performed strongly, economically sensitive sectors such as consumer discretionary struggled. Technology performance was mixed, with software stocks under pressure, partly offset by more resilient hardware and semiconductor companies.

UK equities were more resilient than many global peers and were up 2.8% over the quarter. The market benefited from its heavy exposure to energy and commodity companies, which gained from rising oil and gas prices. A weaker pound also supported internationally focused firms. However, domestically oriented mid-cap companies underperformed, reflecting concerns about economic growth. Tech and consumer-focused sectors were among the weakest areas.

UK equities were more resilient than many global peers and were up 2.8% over the quarter. The market benefited from its heavy exposure to energy and commodity companies, which gained from rising oil and gas prices. A weaker pound also supported internationally focused firms. However, domestically oriented mid-cap companies underperformed, reflecting concerns about economic growth. Tech and consumer-focused sectors were among the weakest areas.

Bond markets were volatile and generally weak during the quarter. Rising energy prices increased concerns about inflation, leading investors to scale back expectations for interest rate cuts and, in some cases, price in potential increases. Government bond prices fell across major markets, with UK and European bonds particularly affected. US Treasuries were more resilient, helped by the US being a net energy exporter and signs of a softening labour market.