First Quarter 2026 Review.
January to March 2026
The first quarter of 2026 was dominated by the outbreak of war in the Middle East when the US and Israel attacked Iran on February 28th. While that was the key determinant of asset price outcomes and portfolio performance in the first quarter of 2026, there were other factors that unnerved markets in January and February. Otherwise, major economies were weak or weaker and inflation continued to trend lower in those countries/regions.
In January:
- The value of all the world’s above-ground gold rose to USD39trln on Thursday, January 29th. But then fell USD3.4trln on the final business day of January, roughly the market capitalisation of Microsoft.
- Donald Trump has continued to dominate both financial market headlines and the broader news through domestic and foreign policy initiatives. International stakes have been raised by the extraction of Venezuelan President Nicolas Maduro and his wife and by threats to Iran and Cuba. This geopolitical tension lifted gold to new highs before a price reversal.
In February:
- The share prices of US software companies took a hit on fears that artificial intelligence (AI) will render them obsolete. Their price declines were triggered by the release of Anthropic’s Claude Opus 4.6. This came on top of disquiet about the huge amounts being spent by those companies on capital expenditure.
- US Supreme Court ruled Trump’s tariffs to be an illegal use of emergency law powers.
- Private credit market funds aimed at US retail investors were unnerved by Blue Owl permanently halting redemptions at one of its funds. Other private credit funds followed suit.
- Japanese Prime Minister, Sanae Takaichi, gambled to build on her popularity and gain a decisive majority for her Liberal Democratic Party (LDP) in a snap election on February 8th. It paid off. She now has a sizeable majority.
In March:
- Due to the conflict in the Middle East, financial markets suffered much turbulence with bond and equity indices falling. Gold, an expected beneficiary in such situations, continued to fall from its lofty heights at the start of 2026.
- The closure of the Strait of Hormuz, restricting the flow of oil by some 20 million barrels per day, has seen fuel prices rise precipitously across the world’s economies leading to fears of a substantial increase in inflation.
- 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.
- Central Banks like the Bank of England, who were looking to lower interest rates further in response to declining inflation, have now gone on hold, with futures markets suggesting a potential rise. Comparisons to 2022 are flawed for the following reasons:
- Interest rates are substantially higher now than they were in 2022, when the Bank of England and other central banks were scrambling to raise rates as inflation soared post Covid.
- Economic activity is either weak or weakening in the major economies.
- Raising official interest rates would act as a further burden for consumers already grappling with a rising cost of living which has just been made worse.
- Supplies of essentials including labour were in short supply, so workers had significant leverage to raise wages in 2022, whereas now labour markets are struggling to deal with rising unemployment and hence little bargaining power exists.
As we enter the second quarter of 2026, hopes rest on a ceasefire or some other means of effecting a cessation to hostilities in the Middle East and importantly, a reopening of the Strait of Hormuz.
Despite the negative price moves for equities and bonds in March, Prosper and Plus portfolios were either slightly positive or negative in the first quarter. The exceptions were the Purpose portfolios which, due to their exclusions, are unable to own the assets that provided a positive ballast to the other portfolio ranges.
It is important to remember that a year ago on April 2nd 2025, financial markets were reeling from President Trump’s ‘Liberation Day’ only to rally a week later when Trump soften his stance on tariffs.
Portfolio Activity
In general, Pier portfolios remain broadly diversified across bonds and equities. Bond exposure is focused on short to medium maturities to provide better price stability, rather than longer maturities where budget deficit funding delivers a risk of price depreciation. Equity exposure is focused on global, not regional, equities of all sizes where valuations are not stretched and profitable companies proliferate .
The first quarter activity for Pier portfolios centred around continuing to mitigate risk and specifically risk from:
- Equity concentration in a few very large US companies
- Duration/interest rate risk from longer-dated bonds.
Currency risk is centred on having a low non-GBP exposure with particular reference to US Dollars. Non-GBP exposure is effectively balanced between US Dollars offset by Japanese Yen and Euros – currencies that historically move in the opposite direction to the US currency. Pier manages foreign currency risk as part of the investment process to deliver inflation* plus returns.
* Inflation as measured by the UK Consumer Prices Index, aka CPI.
Portfolio Performance
The following table shows the performance of Pier’s portfolios for the first quarter of 2026 and for context, the past twelve months to end March 2026. 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.
| 01/01/2026 | 01/04/2025 | |
| 31/03/2026 | 31/03/2026 | |
| YTD | YoY | |
| Plus Four (Fund & MPS linked performance) | 0.25% | 17.61% |
| Plus Three (Fund & MPS linked performance) | 0.11% | 14.96% |
| Plus Two (Fund & MPS linked performance) | -0.12% | 11.85% |
| Plus One (Fund & MPS linked performance) | -0.45% | 8.86% |
| Pier Income | 0.37% | 11.67% |
| Prosper Four | 0.36% | 18.26% |
| Prosper Three | 0.11% | 15.35% |
| Prosper Two | -0.10% | 12.03% |
| Prosper One | 0.28% | 12.27% |
| Purpose Four | -4.11% | 8.60% |
| Purpose Three | -3.55% | 7.54% |
| Purpose Two | -2.70% | 6.75% |
| Purpose One | -1.90% | 5.85% |
Please remember that past performance does not predict future performance and it should not be the main reason for making an investment decision. The value of investments and income from them can fall as well as rise. Portfolio performance may differ from the performance shown above for several reasons including differences in the timing of an initial investment. Subsequent portfolio changes, and the availability of certain funds on various platforms can affect the performance of the Model Portfolios.
Pier Performance – Key Portfolio Influences
Plus
What Worked
Polar Capital Artificial Intelligence: +13.35%
A global equity themed portfolio focusing on both the enablers and beneficiaries of artificial intelligence and its productivity gains.
WS Havelock Global Select: +8.50%
An index-agnostic concentrated portfolio of attractively-priced global businesses that was able to buck the broader trend for equities over the quarter despite being 4.9% lower in March.
What Didn’t
First Trust Nasdaq Cybersecurity ETF: -13.73%
This ETF bore the brunt of the negative sentiment towards software companies although its speciality theme of cyber security enabled it to be the best performing holding across all the Pier portfolios in March and one of only two in positive territory in March.
Prosper
What Worked
Dimensional Global Value: +6.76%
A global equity offering that tracks/focuses on attractively-priced smaller and mid-size businesses.
L&G Japan Index: +3.12%
This tracks the broader Japanese equity market which, despite adown 11% in March, still managed to be up meaningfully for the quarter buoyed by the Japanese Prime Minister’s winning of an outright majority at the snap election in February.
What Didn’t
Xtrackers S&P500 ETF GBP Hedged: -6.53%
The US equity market endured a poor quarter in part due to concerns over how disruptive artificial intelligence (AI) would be for software companies and the increase in expenditure by some of those companies to remain competitive in the AI world.
Income
What Worked
Schroder Asian Income: +7.12%
This fund benefited from its allocations to Taiwanese and Australian equities. The two largest holdings, Samsung (S Korea) and TSMC (Taiwan) both performed well over the quarter .
Vanguard FTSE All World High Dividend: +5.25%
This ETF tracks the FTSE All World Index’s High Dividend paying equities. The yield from those 2,275 companies proved to be a valuable asset in the first quarter.
What Didn’t
VT Tyndall Unconstrained UK Income: -12.09%
This fund was impacted by the influence of the rising energy prices on many of its larger holdings. A probable overreaction to the events of March on this fund.
Purpose
What Worked
GS UK Gilt 1-10 Year ETF: +2.10%
In what was a tough quarter for bond markets, this ETF’s focus on not being exposed to longer-dated maturities proved to be beneficial as a defensive yet positive influence.
iShares MSCI EM SRI ETF USD: +1.19%
Although emerging market equities suffered in March, this socially responsible screened ETF was able to post a positive outcome for the quarter due to its performance in January and February.
What Didn’t
UBS MSCI USA Soc Resp ETF GBP Hgd: -8.29%
The US equity market was a poor relative performer in Q1. There was little appetite for socially responsible companies during that period equating to a disappointing outcome.
Please remember that past performance does not predict future performance and it should not be the main reason for making an investment decision. The value of investments and income from them can fall as well as rise.
