Commentary for April 2026
Market Overview
Global shares rebounded sharply in April, erasing their previous losses to close 6.3% higher. Investors rotated back into risk assets as a two-week ceasefire between the US and Iran, signed on April 7 (later extended indefinitely), gave investors hope that the conflict could end without a prolonged economic shock. Strong corporate earnings provided a further boost to sentiment. President Trump’s subsequent decision to impose his own naval blockade of Iranian ports in the Strait of Hormuz was interpreted as a US de-escalation in favour of applying economic rather than military pressure. Developed market equities posted solid gains, yet these were eclipsed by an 11.3% surge in emerging markets, led by Asia, where markets such as Korea and Taiwan benefited from robust demand tied to the ongoing AI infrastructure build-out, supporting strong gains in semiconductor stocks.
Gold and silver rallied to close 3.2% and 5.6% higher, respectively. While precious metals continue to digest the big moves seen in 2025 and early 2026, the secular trend of central bank buying remains intact, with gold’s role as a strategic asset underlined by current global instability.
Conversely, the month remained challenging for global bond markets, as elevated crude oil prices and rising inflation expectations kept yields volatile and tempered the outlook for central bank policy easing. News flow regarding negotiations between the US and Iran generated significant volatility in the oil price, which initially fell back to $91, before climbing to a four-year high of $126, then reversing lower to close the month at $114. In the UK the sell-off in bonds has been exacerbated by increased political uncertainty ahead of May’s local elections and rising expectations that Prime Minister Starmer could be ousted in favour of a less fiscally disciplined successor. The 10-year government bond yield rose above 5% for the first time since 2008, sending prices 4.2% lower.
US equities rebounded strongly by 7.2% to a new all-time high, completing one of the fastest recoveries from a correction on record. A positive earnings season reinforced the rally, with a high proportion of companies exceeding expectations. Large technology stocks stood out, with chipmakers doing the heavy lifting on the back of strong earnings from Intel, SAP and TSMC, while financials and industrials also posted solid results. Bank earnings confirmed that the US economy had remained healthy during recent turbulence, with JP Morgan, Goldman Sachs, Citigroup and Wells Fargo all reporting profits that beat expectations. However, other technology-related sectors such as software remained out of favour. Consumer cyclical sectors also lagged on fears that an increase in the cost of living would weigh on demand. Looking forward, many companies flagged rising input and energy costs, suggesting that margins could come under pressure in coming months should the oil price remain high.
A resilient US macroeconomic backdrop provided a further boost, giving investors increased confidence and a reason to assume risk after a volatile March. The economy grew at a rate of 2% during the first quarter, which is similar to the pace seen in 2025. However, inflation is running too hot, hitting 3.8% in April, with signs that the rise in energy prices is also spilling over into rent, food and clothing. Interest rate cut odds collapsed to virtually zero through year-end.
UK equities rose by a more muted 2.1%, although smaller companies surged 6.1%. Financials performed strongly but overall gains were capped by the market’s high weighting in defensive sectors such as healthcare and consumer staples along with energy, which saw profit-taking after strong gains. DCC and Intertek were the latest companies to receive approaches from private equity, underscoring the value credentials within the UK market.
UK inflation slowed to 2.8% in April, down from 3.3% the month prior. However, this does not yet account for the rise in energy costs, with Ofgem’s energy price cap expected to increase significantly in next month’s review. A softening labour market and fragile growth should limit the risk that rising inflation feeds into broader price and wage-setting across the economy. The Bank of England kept interest rates steady at 3.75% and said that it “stands ready to act as necessary” to ensure that the CPI remains on track to meet the 2% target in the medium term.
Elsewhere, Japanese equities rebounded 5.9%, with the Nikkei 225 closing above 60,000 for the first time in its history. European equities rose 3.9%. Both regions saw strong gains in cyclical sectors such as industrials and capital goods as a result of increased manufacturing activity and trade optimism. Banks also advanced on the prospect of higher interest rates and better net interest margins. The European Central Bank and the Bank of Japan also opted to keep official interest rate policy on hold.
Looking Forward
Markets have seen a resurgence of animal spirits on expectations of a peace deal between US and Iran. Perhaps most impressive is that the S&P500 is now back above its February 28 level when the Middle East war started. It took just eleven trading days to recover from its recent low to reach a new all-time high. The speed of this rebound reflects investor confidence that the conflict will resolve without a lasting economic impact. The key takeaway is that resilient economic data and company fundamentals in the world’s largest economy have provided a strong anchor for markets despite geopolitical uncertainty.
Elevated energy prices linked to the Middle East conflict continue to cloud the outlook, with the path ahead dependent on how quickly these pressures ease. Prices could spike further if the current supply constraints continue and the Strait of Hormuz is not opened soon. As a result, inflation risks have moved higher for 2026, while growth expectations have softened in energy-importing regions outside of the US, such as the UK and Europe. Central banks are taking a cautious stance, but persistent inflation could delay or even reverse expected rate cuts.
As inflation risks have increased the case for owning real assets has strengthened. Bank of America’s Michael Hartnett, one of the most widely read strategists on Wall Street, recently declared “commodities the biggest trade of the next five years”, anchoring the call on factors such as deglobalisation, chronic under-investment and a move away from dollar dominance.
Capital has chased the AI trade while ignoring the physical assets required to enable it.
Recent geopolitical events have highlighted the need to secure critical assets, leading both the US and China to accelerate their global resources grab. The AI infrastructure build-out will not be possible without vast quantities of copper, aluminium, nickel, zinc, silver and rare earth metals, along with cheap energy to power it. Who owns these critical minerals is likely to win the AI war. Investors are starting to rotate into the commodity complex in anticipation of this trend.
Our Strategy
Against this backdrop, the outlook for equities remains constructive, albeit with a wider range of potential outcomes. We favour regions outside of the US with more resilient growth dynamics, including Japan, Asia and emerging markets, along with the UK.
On an economic basis the US economy remains in good health but on a sectoral basis, the US, with its heavy technology bias and premium valuation is likely to fare worst in a more inflationary environment, as we saw in 2022 coming out of the pandemic. Our allocation to US equities is significantly lower than a passive index market capitalisation-weighted approach. Looking forward, we believe that other markets and sectors offer a better long-term return and risk profile.
The UK remains one of the cheapest markets globally. In sector terms, it features many of the “old economy” companies that are suddenly coming back into vogue. Our UK exposure is biased towards cyclical and value-orientated sectors, along with small and mid-cap companies. Despite a moribund domestic economy, more internationally focused large caps are forecast to grow earnings by 19% in 2026. M&A activity has continued to rise, supporting the valuation argument for UK companies. In 2025, 11% of the FTSE 250 index was bid for, well above the normal rate of 2-4%. Among larger companies, four constituents of the FTSE 100 are currently in bid situations, including Beazley and Schroders.
Emerging markets continue to trade at a significant discount to developed market peers, despite a superior outlook for growth. We expect this valuation gap to narrow over time as investors recognise the supportive structural trends that are in place and as they feed through to corporate performance. The region is starting to see strong inflows from foreign investors who remain structurally under allocated even after their strong performance in 2025.
Japanese equities remain underpinned by attractive valuations, a pro-growth policy agenda and robust earnings. Ongoing reform of the corporate governance is designed to return more capital to shareholders through greater share buybacks and dividends, increasing shareholder value.
Exposure to the energy sector has been increased in recent months. Prior to recent geopolitical developments, oil was arguably the cheapest and most disfavoured major asset class in global markets. Energy equities account for a mere 3% of the total US market capitalisation – barely above the pandemic-era lows. The prevailing view has been that the oil industry belongs to a bygone era, a relic of the industrial past. The same sentiment was evident toward gold in the late 1990’s, shortly before it embarked on one of the strongest bull markets in modern history. Recent events in the Middle East have provided a powerful catalyst for a re-rating.
Our constructive view on gold and silver remains unchanged. Gold continues to play a critical role as a portfolio diversifier amid geopolitical uncertainty and concerns around government debt and currency stability. At the same time, precious metal mining equities are benefiting from strong pricing dynamics, supporting robust profitability and sector-leading growth.
Overall, we continue to manage investments in a manner that allows us to capture the upside in financial markets while also effectively controlling risk to dampen volatility and smooth the path of returns.
