Investors Trust – Quarterly Review

by Investors Trust May 5, 2026

An in-depth look at the latest economic and market developments

Issue | First Quarter 2026

Global markets began 2026 with a constructive tone, building on the momentum of late 2025. January was marked by improving market breadth, with U.S. small caps and emerging markets leading returns. Equal-weight indices outperformed cap-weighted benchmarks, signalling a broadening of leadership beyond mega-cap technology. Risk appetite was supported by resilient U.S. economic data, stable credit conditions, and continued optimism around AI-driven investment, even as valuation concerns started to surface.

Beneath this positive backdrop, however, underlying risks remained present. Trade tensions re-emerged, the U.S. detention of Venezuelan President Nicolás Maduro heightened Latin American political uncertainty, and geopolitical tensions persisted—most notably involving Iran. Commodity markets began to exert a growing influence. Energy prices moved sharply higher, while gold benefited from demand for hard-asset protection amid U.S. dollar softness and ongoing fiscal concerns

Market sentiment shifted noticeably in February. U.S. equities weakened, led by technology and higher‑growth segments, as investors reassessed earnings durability and the sustainability of heavy AI‑related capital expenditure. Softer U.S. labor-market data reinforced the view that growth was beginning to cool, increasing investor selectivity across sectors. During the month, the U.S. Supreme Court overturned the Trump administration’s “reciprocal” tariff regime, temporarily easing trade-policy uncertainty and influencing market sentiment, although broader concerns around global trade and geopolitics remained unresolved. Regional performance diverged: Japan benefited from political clarity and expectations of fiscal stimulus, while European equities found support from expanding defense and infrastructure spending, despite persistent trade uncertainty. Emerging markets became more uneven, with China continuing to weigh on performance amid structural challenges.

March marked a decisive turning point. A major escalation in the U.S.–Iran conflict and the closure of the Strait of Hormuz triggered a sharp surge in oil prices, reigniting inflation concerns and pushing bond yields higher. Markets moved rapidly from rotation into outright de‑risking, with equities, bonds and risk‑sensitive currencies selling off in tandem. Credit spreads widened but stopped short of systemic stress, while the U.S. dollar regained support as higher real yields and elevated energy prices weighed on risk appetite.
The Federal Reserve left rates unchanged in March at 3.5–3.75% and signaled limited scope for easing in 2026, highlighting the difficult balance between energy-driven inflation and a cooling labor market. The Committee noted elevated economic uncertainty and the unclear implications of the Middle East conflict. Although a late month rebound recovered part of the losses, the S&P 500 closed the quarter with its weakest performance since Q3 2022.

Below, you can find a brief summary of the allocation views for the upcoming months from some of our key partners.

United States Equities
Asset managers are broadly constructive, though with different emphases. BlackRock has moved back to an overweight, supported by resilient earnings and the structural tailwind from AI. PIMCO sees opportunities but stresses rotation toward value and greater diversification given elevated valuations. Franklin Templeton remains more cautious on a tactical basis due to geopolitical uncertainty, despite acknowledging solid underlying earnings growth.

Emerging Markets Equities
Sentiment toward emerging markets has improved. BlackRock and Franklin Templeton highlight strengthening earnings momentum, particularly in Asia, driven by semiconductors and AI-related supply chains. PIMCO shares this positive view, noting that EM equities offer technology exposure at more attractive valuations than the US, while emphasizing the importance of selectivity.

Europe Equities
Views on Europe are mixed. Franklin Templeton sees medium-term opportunities supported by potential monetary easing, while BlackRock remains neutral and favors a selective, sector-based approach. The latter argues that sustained outperformance would require clearer structural reforms and stronger growth dynamics.

Gold
PIMCO views gold as a strategic diversifier, supported by geopolitical risk, rising sovereign debt and central bank demand, but warns that valuations are elevated. J.P. Morgan holds a more bullish stance, emphasizing strong and persistent demand from central banks and investors, and gold’s role as a store of value in an uncertain macro environment.

US Sovereign Debt
There is broad agreement that fixed income has become more attractive relative to cash. PIMCO and AllianceBernstein favor short and intermediate maturities to capture yield while limiting risk. Franklin Templeton remains cautious on long-duration US Treasuries due to persistent inflation pressures and large fiscal deficits.

US Credit
Managers see carry as the main driver of returns, with limited scope for further spread compression. PIMCO and AllianceBernstein emphasize quality, liquidity and active security selection, favoring investment-grade credit and higher-quality segments of high yield. Overall, the backdrop is supportive, but with little margin for error.

International Bonds and Credit (including EM Debt)
Emerging market debt stands out as an area of strong consensus. J.P. Morgan and BlackRock highlight improving fundamentals, attractive yields and support from a global easing cycle, particularly in hard-currency EM debt. Franklin Templeton is more cautious on local-currency debt but agrees that the asset class benefits from the current monetary environment.

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