April 2026 Review

Straitjacket

• The continued closure of the Strait of Hormuz has caused fuel prices to rise precipitously across the world’s economies, leading to fears of a substantial increase in inflation which have begun to materialise in official economic statistics.

• Already stretched consumers are now faced with paying much more for their fuel as well as food – fertiliser supplies have also been disrupted by the Strait of Hormuz’s closure.
• The Bank of England held interest rates at 3.75% at the meeting of its Monetary Policy Committee (MPC) on April 30^th. At the same meeting, the MPC stated that it expects 3% plus inflation for the rest of 2026.
• The European Central Bank (ECB) also kept its key lending rate unchanged on the same day. The ECB’s rate is 2%.
• The night before the meetings of the ECB and MPC, the US Federal Reserve kept its Fed Funds rate in the 3.5% to 3.75% range for the third successive meeting.
• The day before the US, the Bank of Japan kept its overnight rate at 0.75% with an increase to 1.0% likely in June.
• However, the prospect of rising inflation, coupled with the additional prospect of increasing government  borrowing to assist beleaguered consumers, pushed up government bond yields (prices fell).  None more so than in the UK where political pressure on Prime Minister Kier Starmer led to ten year UK Gilt yields rising above 5.0% – increasing the cost of borrowing and the re-financing of existing debt.  As the chart below sourced from Trading Economics illustrates, ten year Gilt yields were just over 4.2% at the end of February this year.

• Global equity markets largely shrugged off the impasse in the Middle East to register a meaningful rebound from the negative price moves of March. This recovery in equity prices was led by the US demonstrating a more resilient economy (up 2.0% in the first quarter of 2026 as measured by gross domestic product (GDP)) and the prospect of a positive earnings season.  Indeed, the latter has materialised in the results so far led by Alphabet (Google) and Apple but, notably, Meta (Facebook) fared less well due to the size of its capital expenditure plans related to artificial intelligence (AI). Semiconductor companies such as Taiwan Semiconductor Manufacturing Company (TSMC) enjoyed another strong month, up 2% in April.  Looking through the underlying funds, TSMC is the largest individual equity position across the Pier portfolios.

Your Money

As we regularly remind investors, timing markets is extremely difficult and usually leads to sub-optimal investment returns. April served to remind us of that as global equity markets rebounded strongly from March’s falls in prices, despite the ongoing geopolitical challenges, notably with regard to the Middle East and the stand-off between Iran and the US over the closure and blockade of the Strait of Hormuz.

The inflation increases now being witnessed in most economies have led to fears of official interest rate increases in the UK and Europe. Bond markets have re-priced accordingly with yields rising across all maturities. In anticipation of greater price volatility in longer maturities, Pier portfolios reduced interest rate risk (duration) across portfolios One, Two and Three at the beginning of April. UK political pressures have also been a factor in the increase in UK bond yields.

Pier Performance

*The figures for the Plus range relate to the IFSL Pier Plus Funds with effect from 1st January 2026 and to the Plus Model Portfolios prior to that date.