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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
Expectations of a de-escalation in tensions between the US and Iran supported strong equity market returns over the last quarter. Fixed income markets also delivered positive performance, although resilient economic data led investors to scale back expectations for monetary policy easing and prompted some central banks to adopt a more hawkish tone. Despite this, moderating inflation pressures helped support bond markets. Overall, a more constructive risk environment drove broad-based gains across most asset classes. Against this backdrop, the Monthly Income Portfolio returned 7.1% and the Monthly Income and Growth Portfolio returned 9.0%, with equities the key contributor to returns.
The performance figures shown refer to past performance. Past performance is not a reliable indicator of future performance.
Equity
How our equity holdings performed
AI demand boosts Asian and emerging markets
Asian and emerging markets were the standout equity region, driven by exceptional gains in Korea and Taiwan as investor demand for semiconductor and AI-related companies accelerated. Reflecting this, our managers in this region were among the strongest performers, benefitting from exposure to semiconductor, tech, and AI-driven names across the region.
US equities lead on tech strength
Technology stocks were a key driver of market gains more broadly, not just in Asia and emerging markets. Against this backdrop, US equities performed particularly well, with the ongoing AI-driven investment cycle continuing to support corporate earnings growth across multiple sectors. All our US equity holdings returned delivered double digit gains over the quarter, and in aggregate were the largest contributor to performance. The iShares Core S&P 500 ETF led the pack given its exposure to mega-cap technology names.
Financials and exporters lift Japan
Elsewhere, Japanese equities staged a strong second quarter. A weak yen continued to support exporters, while a steeper yield curve provided a favourable backdrop for financial stocks. The M&G Japan Fund outperformed the broader market, delivering 18.2% during the period.
Fixed income
How our fixed-income holdings performed
Alternative fixed income leads bond returns
Our fixed income holdings delivered positive returns overall. Gilts outperformed global bonds despite Sir Kier Starmer’s resignation, with Andy Burnham the most likely candidate to take over. The latest inflation print came in better than expected and markets subsequently reduced the probability of interest rate hikes from the Bank of England in the near term. However, it was our alternative fixed income holdings that performed the best over the quarter, benefitting from improving investor sentiment. The Fair Oaks Income investment trust delivered double digit returns, more than making up for previous weakness around the conflict in Iran.
Alternatives
How our alternatives holdings performed
Solid infrastructure
Our alternatives holdings delivered positive returns overall, outperforming fixed income and cash. Our allocation to infrastructure led the pack, with the International Public Partnerships investment trust posting double digit gains over the quarter. The trust benefitted from improving investor sentiment towards listed infrastructure assets as interest rate concerns eased. Our other infrastructure holding, the FTF Clearbridge Global Infrastructure Income Fund, also had a good quarter. The fund invests in listed infrastructure companies operating essential assets such as utilities, pipelines, railways, and transport networks, and we continue to see attractive long-term growth opportunities from themes including rising energy demand, electrification, and the ongoing need for investment in critical infrastructure globally.
Portfolio activity
The second quarter was characterised by periods of heightened market volatility. While there were no changes to the underlying fund selection, we did use the market volatility to rebalance portfolios, adding to several areas that had experienced weakness and taken on more attractive valuations, while trimming exposures that had outperformed.
Investment outlook
Much like last year, 2026 has been a bit of a wild ride, but global equity indices are up more than 10% as we end the first half of the year. The conflict in the Middle East has buffeted markets, but the AI-driven growth theme is winning out overall. However, the ‘AI trade’ has morphed from backing the US mega caps into a broader consideration of the entire supply chain as mammoth investment spending comes up against supply bottlenecks, be that in raw materials, chips, or energy generation.
Equities: prices are high, but for a reason
When markets are riding high it is natural (and healthy) to be a little nervous. However, returns are typically strong when earnings are growing quickly, as is the case now. Despite the positive corporate backdrop, something that gives us pause is how much earnings growth is already priced in, it would not take much to underdeliver on these lofty expectations. It is the mismatch between expectations and reality that drives stock prices.
Bonds: the hikes that never will be
Bond markets expect roughly two interest rate increases from each of the Fed, ECB, and BoE over the next year. This is in response to the potential inflationary impact of conflict in the Middle East. Hiking rates would be an unusual response to a supply shock as it will do nothing to help tankers transit the Strait of Hormuz, although it might restrict inflation by imposing pain on the rest of the economy. While the corporate picture looks strong, the job markets look weaker, so it would not be a big surprise if these hikes are not delivered.
Income: more of the same
Dividends should remain solid over the coming year, with the most growth expect to come from Japan. Despite this, dividend yields have been compressed by share price gains. While cash rates are elevated compared to the past decade or so, yield curves are not particularly steep and corporate bond spreads are tight. This means the additional compensation from holding government or corporate bonds rather than cash is not that high. So, the overall picture is one of reasonable income but with yields some way below their peaks.
Helen Bradshaw
Portfolio Manager
CJ Cowan
Portfolio ManagerSolutions
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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 Monthly Income Portfolio and Quilter Investors Monthly Income and Growth Portfolio are sub-funds of Quilter Investors Multi-Asset OEIC, an investment company with variable capital incorporated in England and Wales. Quilter Investors Multi-Asset 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
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