Please note that this commentary reflects conditions at the time of writing (Tuesday 7 April 2026).Financial markets are moving rapidly in response to current global events, and with Donald Trump issuing a stream of often contradictory statements and social media posts, the odds of a swift resolution to the Iran war remain highly uncertain. As a result, some of this commentary may be outdated by the time you read this. To stay informed of our latest views, please ensure you are subscribed to receive our regular Market Summary emails and videos. If you haven’t already done so, please visit www.wealthatwork.co.uk/mywealth/sign-up.
After a strong start to the valuation period (the three months from 5 January 2026 to 5 April 2026), the past five weeks have been pretty bruising for markets.
The conflict in the Middle East, alongside the effective closure of the Strait of Hormuz, has pushed oil prices above $110 a barrel and triggered a broad sell‑off across global financial markets.
While it is easy to see this as merely affecting petrol forecourt prices, oil’s influence extends far deeper, permeating almost every part of the global economy, from manufacturing and transport to plastics, fertilisers, and even basic household goods.
In effect, higher oil and energy costs act as an economy‑wide tax: transport becomes more expensive, production costs rise, and everyday goods cost more. And when these costs jump, inflation inevitably follows.
This shock has come at precisely the time when we had expected central banks, including the US Federal Reserve and the Bank of England, to be cutting interest rates.
Consequently, we have been forced to reassess that assumption. Instead, we are now considering whether central banks may delay these anticipated interest rate cuts or even replace them with interest rate increases. Much will depend on the duration and severity of the energy supply shock, and one hopes that, by the time this commentary is read, there will have been a credible de-escalation of the conflict, a resumption of shipping through the Strait of Hormuz and lower oil prices – allowing policymakers to respond cautiously to these inflationary pressures.
As always, perspective is key. What matters most in periods like this is resisting the temptation to react to headlines and remain focused on underlying fundamentals.
First, markets have already priced in a considerable amount of bad news. When market sentiment becomes this pessimistic, a rebound does not require unequivocally positive developments, even “less bad news” can be sufficient to drive a recovery.
Secondly, despite the headlines, oil prices remain well below previous peaks and below levels reached in 2022 after Russia’s invasion of Ukraine. Importantly, the global economy today is in a stronger position than it was in the immediate post-Covid lockdown period.
Thirdly, falling markets have led to improved valuations. Investors are now able to buy future earnings at a much lower prices – or put another way, it is like shopping for bargains when high-street stores are running sales.
Finally, it is worth remembering that artificial intelligence (AI) remains a significant long-term driver of productivity and innovation, with the potential to transform industries and underpin sustained demand for technology infrastructure.
While we appreciate geopolitical shocks often feel seismic in the moment, history has shown us that financial markets can deal with any eventuality, they simply hate periods of uncertainty. As an example, this time last year markets fell heavily following Donald Trump’s ‘Liberation Day’ trade tariffs. However, when the expected hit to economic growth failed to materialise, markets recovered strongly. This clearly demonstrates that those who resisted any knee-jerk reactions and remained diversified and invested through the turmoil were ultimately rewarded with portfolio gains.
Income Element
Central banks were expected to cut interest rates this year. However, should inflation re‑accelerate, interest rates may need to stay higher for longer, or potentially increase.
As a result, government bond yields moved significantly higher during the valuation period. As yields rose, bond prices (which move inversely to yields) declined.
That said, following Russia’s invasion of Ukraine in 2022, central banks increased interest rates sharply in response to an energy‑driven inflation spike. It later became evident that tighter financial conditions, arising from the rapid pace of interest rate increases, amplified the subsequent economic slowdown beyond the initial impact of the oil shock. As a result, we expect policymakers to be cautious about responding too forcefully to renewed inflationary pressures, particularly if economic momentum begins to weaken. In such a scenario, the balance of risks could quickly shift from inflation to growth, potentially reopening the door to interest rate cuts – which would support lower yields and higher bond prices.
Against this backdrop, our strategy of holding a diversified portfolio of financially secure companies, with investment‑grade credit quality and stable cash flows, to maturity remains appropriate.
Long-Term Growth Element
Notable portfolio adjustments during the valuation period include the partial sale of RELX (a data analytics and publishing group) and the full sale of Experian (a provider of consumer credit monitoring), reflecting concerns that generative artificial intelligence will disintermediate elements of their services.
Within the insurance sector, we switched out of Aviva into Legal & General. Aviva’s share price has performed strongly following the integration of its Direct Line acquisition, which limits the scope for further outperformance. By contrast, Legal & General offers a more compelling valuation alongside a clear, well‑supported capital return policy.
We exited BT following a period of strong relative performance, as competitive pressures have intensified within Openreach’s broadband business. The proceeds were reinvested into Vodafone, where there is growing evidence that its long-awaited turnaround is taking hold, supported by a return to growth in Germany and early benefits from the Three UK merger.
We reduced our exposure to US equities in January in response to increased short‑term geopolitical uncertainty. In February, we used some of the proceeds to increase exposure to Asian equities, where valuations remain attractive across several markets. The remaining proceeds were held in cash and liquidity funds, which provided some resilience during the market weakness seen in March.
Investment returns for clients with Ethical portfolios lagged those of our unrestricted growth portfolios during the valuation period. This largely reflects the exclusion of sectors such as defence and fossil fuel extraction within SRI funds, which generated strong returns over the past three months.