Market Commentary
Q1 2026
Global equities declined in Q1 2026 as escalating geopolitical tensions in the Middle East drove a sharp rise in energy prices and renewed inflation concerns. US equities underperformed, with the S&P 500 falling around ‑4.4% over the quarter, weighed down by weaker performance in mega‑cap technology stocks and rising risk aversion. The Nasdaq Composite dropped approximately ‑8.1%, reflecting its heavy exposure to growth stocks, which were pressured by higher discount rates and scrutiny over AI‑related capital expenditure.
Developed Markets
Emerging markets were comparatively resilient, with the MSCI Emerging Markets Index broadly flat to slightly negative over Q1 2026 (around ‑0.1%). Early-quarter gains in North Asia were offset by a stronger US dollar and rising energy prices following the Iran conflict. Relative out performance versus developed markets was supported by cheaper valuations and lower exposure to US mega‑cap technology stocks.
Emerging Markets
Europe (ex UK)
European equities declined during the quarter, with the MSCI Europe ex UK Index falling by roughly ‑2.3% in Q1 2026. Rising gas prices and heightened inflation risks weighed on sentiment, while cyclical sectors underperformed. Financials and energy stocks provided some offset, but concerns around European growth and monetary policy tightening limited equity performance.
UK Equities
UK equities proved relatively resilient despite volatility, supported by strong exposure to energy and mining companies. The FTSE 100 rose approximately +3.4% over Q1 2026, benefiting from higher oil and commodity prices and its defensive, internationally diversified earnings base. The broader FTSE All‑Share also delivered positive low‑to‑mid single‑digit returns, outperforming many global peers, although domestically focused mid‑caps lagged as higher interest rate expectations weighed on growth outlooks.
During Q1 2026, the Federal Reserve maintained a cautious, wait‑and‑see stance, holding the federal funds target range at 3.50%–3.75% amid persistent inflation risks and heightened geopolitical uncertainty. Fixed income markets were volatile, with the 10‑year US Treasury yield moving higher through most of the quarter, briefly rising from around 4.0% toward 4.3%, as surging oil prices and inflation expectations reduced the likelihood of near‑term rate cuts. Late‑quarter yields partially retraced as energy prices eased and risk sentiment improved, although rates remained elevated overall. The evolving rate outlook and safe‑haven demand supported a stronger US dollar, which further tightened financial conditions and weighed on global fixed income performance during the period.
Fixed income and Monetary policy
Commodities
Commodity markets strengthened sharply in Q1 2026 as geopolitical escalation in the Middle East and renewed inflation fears drove investor demand for real assets. The Bloomberg Commodity Index rose by around 24%, led by a surge in energy prices following disruption risks to oil flows through the Strait of Hormuz, with crude prices rising more than 50% at peak levels during the quarter.
Precious metals experienced heightened volatility, with gold initially benefiting from safe‑haven demand before easing toward quarter‑end, as higher bond yields and a stronger US dollar reduced its relative appeal. Silver followed similar dynamics, supported early by risk aversion and industrial demand but later pressured by tighter financial conditions. Overall, commodities reinforced their role as an effective hedge during periods of geopolitical stress and shifting monetary expectations.
Q1 2026 IP MPS Performance and fund changes
Accumulation Range
During this period, we increased the Jupiter Merian Global Equity Absolute Return to the Moderately Cautious as the fund had a negative long-term correlation to many of the equity holdings within the portfolio, we also reduced the Cohen & Steers Diversified Real Assets due to the volatility it contributed to the moderately cautious model.
Income Range
Our Income range continued to beat benchmark competitively During this period we introduced the Pimco GIS Income fund to our Moderately Cautious and Balanced portfolios and increased the Aegon Diversified Monthly Income fund in our balanced income and removing the Royal London Short Term Money Market from the moderately cautious model and the Invesco Distribution from the balanced model. Furthermore, the Trinitybridge diversified income was reduced on the Moderately Cautious model, and the Trinitybridge Select Fixed Income was reduced on the Balanced model.
Passive Range
Within our Passive range, we made no changes as we deemed the range to have a well-balanced and diversified equity and fixed interest allocation.Martin Nelmes
Investment Director and Chairman of the Network Investment Committee
This document is aimed at Investment Professionals only and should not be relied upon by Private Investors. Our comments and opinion are intended as general information only and do not constitute advice or recommendation. Information is sourced directly from fund managers and websites. Therefore, this information is as current as is available at the time of production.
On-Line Partnership Group Limited (reg. no. 03936920) and its subsidiaries, The On-Line Partnership Limited (reg. no. 03926063) and the Whitechurch Network Limited (reg. no. 03663042) trade collectively as In Partnership. All three companies are registered in England and Wales. The On-Line Partnership Limited and the Whitechurch Network Limited are authorised and regulated by the Financial Conduct Authority. Registered Office: 50-56 North Street, Horsham, West Sussex, RH12 1RD.