Data source: Bloomberg. Performances in base currency.

Global equities fell in Q1 2026, led by weakness in US technology stocks and escalating tensions in the Middle East.
Markets reversed sharply in March as the conflict disrupted energy supply, pushing oil prices higher and reigniting inflation concerns.
This triggered a risk-off shift, with investors rotating out of growth and into value. 

 Sources: Schroeders, Bloomberg, Yahoo Finance, JP Morgan, Reuters

In the US

• Quarter in review: US equities declined in Q1 2026, marking the weakest quarter since 2022. Markets started strongly but reversed as geopolitical tensions and rising oil prices triggered volatility and increased risk aversion.
• Top-performing sectors: Energy and basic materials outperformed, benefiting from higher commodity prices and supply disruptions linked to the Middle East conflict.
• Laggards and concerns: Technology stocks underperformed, particularly software, as concerns grew that new AI capabilities could weaken the SaaS model and as investors questioned the returns on rising AI-related capex.

In the Rest of the World

• Quarter in review: Emerging markets held up better than developed markets in Q1 2026 (MSCI EM -0.1%), but the quarter split in two: strong gains early on, followed by a sharp sell-off in March. Momentum initially came from AI-driven demand in Korea and Taiwan, before the surge in oil prices reversed sentiment.

• Top-performing sectors: Technology names linked to AI led early gains, while Latin America benefited from higher commodity prices.

• Laggards and concerns: The spike in energy costs hit import-dependent economies across Asia, triggering a broad pullback. China also lagged, weighed down by weak growth and pressure on internet stocks.

In the US

• The Fed kept rates unchanged at 3.50%–3.75% during the quarter while maintaining a cautious stance.

• US Treasuries were relatively resilient and ended the quarter broadly flat, supported by the US being less exposed to rising energy prices and signs of a cooling labour market.

  
  

In the Rest of the World

• The Bank of Japan kept rates unchanged at 0.75% but highlighted rising inflation risks linked to higher energy prices. Japanese government bonds declined as expectations of fiscal support and inflation pressures pushed yields higher.
• Emerging market debt weakened over the quarter, pressured by a stronger US dollar and increased geopolitical risks, which reduced investor appetite for riskier sovereign issuers.

• In Q1 2026, the USD strengthened as geopolitical tensions and rising oil prices triggered a risk-off environment, driving demand for safe-haven assets. The shift in rate expectations—from cuts toward potential hikes—also supported the dollar.

• EUR weakened against the USD as higher energy prices raised concerns about growth and inflation in the eurozone, increasing uncertainty around the policy outlook. GBP also softened, reflecting the UK’s sensitivity to rising energy costs, although moves were more contained.

• The JPY remained weak despite some policy support, as higher global yields and persistent inflation concerns limited its appeal, even as Japan maintained a relatively accommodative stance.

• Digital assets declined over the quarter as risk appetite deteriorated. Crypto continued to behave like high-beta assets, falling alongside equities as investors reduced exposure to riskier segments.

• Precious metals: Gold (+65%) and silver (+144%) were the standout performers in 2025, benefiting from geopolitical uncertainty, a weaker USD, moderating inflation, and slower growth expectations, with silver additionally supported by tight supply and strong demand from solar, EVs, and AI infrastructure.

• Industrial metals: Copper (+40%) and lithium (105%) posted strong gains, driven by supply constraints and rising demand linked to electrification, grid investment, battery storage, and data-centre expansion, particularly in China.

• Energy: Energy markets underperformed as oil prices fell sharply due to global oversupply, rising OPEC and non-OPEC production, and softer demand growth amid slowing economic momentum.

Jamie Dimon, CEO, JPMorgan Chase

“There are lots of tailwinds in 2026. But there are large risks still in front of us that are multi-year and unresolved.”

Jerome Powell, Fed Chair

“Inflation expectations have climbed. The prospects for further rate cuts have significantly worsened.“

16-17 June: FOMC Meeting

First meeting under new Chair Kevin Warsh

What we can expect: 

This will be the most-watched Fed meeting in years. Warsh takes over from Powell with core inflation at 3.2%, energy prices still elevated from the Iran conflict, and a White House pushing hard for rate cuts. Markets are pricing in a small but growing chance of a hike by year-end. Warsh will need to immediately establish his credibility — his tone at this first press conference will set the direction for the rest of 2026

11 June: ECB Governing Council Meeting

The ECB will assess a possible rate change.

What we can expect: 

After holding rates at 2.0% in April, the ECB faces a difficult call. Energy prices remain elevated due to the Middle East conflict, pushing inflation back up after eight consecutive cuts. Lagarde has signalled a data-dependent approach with no pre-commitment. Some economists, including KPMG’s chief economist, have not ruled out a hike if energy pressures persist.

18 June: BoE MPC Policy Announcement 

The Bank of England will meet to discuss a possible rate move

What we can expect: 

The BoE held at 3.75% in April with one member already voting for a hike to 4.0%. Inflation is projected to rise further in Q3 and Q4 driven by energy and food prices. The Bank has explicitly warned it “stands ready to act” — making June a live meeting where a 25bps hike is a real possibility.