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The dominant story remains, of course, Iran. And, in the short term at least, most major markets are trading on how long and how bad it looks like the oil and gas supply disruptions will be. To get this right you need to have a good window on how willing and how capable Iran will be to keep causing trouble. And I am not sure anyone here or even in Iran has access to that window. This leaves markets in a “wait and see” holding pattern. If oil is up, as it has been this week, equities are down and bond yields are higher. And, of course, when you get a hint of a resolution, you see the opposite.
Given there isn’t really much more to say than that I thought I could at least put some context on where we are. This is the table we normally send out with our quarterly return summaries, updated as of this morning (20 March 2026):
The S&P 500 (almost 60% of global equity market indices) is down -3.2% for the year and -3.9% this month. And the rest of the world’s major markets (including Europe, the FTSE 100, Emerging Markets and Japan) are still up for the year, even though they are down high single digits since the war broke out.
Make of that what you will, but to put that -3.9% March return for the S&P 500 into perspective here are the peak-to-trough reactions to other regional wars since the 1970s:
I wrote last week that over the past 40 years there have been 21 US airstrike campaigns in the Middle East and US equity markets have been higher 8 weeks later 95% of the time. The market still looks to be trading with that flavour to me but, to repeat my first paragraph, to have a view here means having a view on Iran which I very much do not have. Wait and see looks like the right approach. And I would add that, looking at our portfolios and broader markets, none of this has (so far) been out of line with what we would expect (or indeed stress test for).
That said, one opportunity does jump out at me. The UK base rate is currently at 3.75%. Before the war, the market was expecting that to be cut to around 3.25% by November (which is close to the Bank of England’s judgement of the neutral rate). But, today, the market is now expecting two and a half 0.25% rate rises:
There is plenty you could say here. But, for now, my point is that if you worry that the war will drag on and get worse then what looks like an inflationary shock today might well start looking like a growth shock in a few months’ time. And if growth does start to slow then central banks, will, I think, be more likely to cut than raise. And, of course, if we do get some sort of ceasefire then I would expect yields to slowly trend back to their pre-war levels. Either way, the 4.4% or so carry on offer at the front end of the gilts curve looks attractive.
Chris Brown, CIO
cbrown@ipscap.com
The value of investments may fall as well as rise and you may not get back all capital invested. Past Performance is not a guide to future performance and should not be relied upon. Nothing in this market commentary should be read as or constitutes investment advice.
