Macro Snapshot – March 2026

February 2026 Market Trends: Geopolitics, Rotation and Energy Shock

February 2026 ended with a seismic geopolitical development that will shape markets well into the spring. Yet the month’s volatility was building well before this geopolitical flashpoint. Slowing US growth, sticky inflation, tariff policy uncertainty, and concerns over AI-driven capital expenditure had already unsettled markets.

The macro story of the month is really three overlapping narratives: the unravelling of the US mega-cap technology trade, the geopolitical shock and its energy-market consequences, and the continued vindication of the diversification thesis with real assets, non-US equities and government bonds all delivering positive returns in sterling terms.

Around the world in February

United States A difficult month for US assets. Fourth-quarter GDP growth came in well below expectations, while December's inflation reading rose to its highest since March 2024. Tariff policy remained a source of uncertainty after the US Supreme Court ruled against the original framework, prompting the administration to impose a revised 15% rate. Technology stocks bore the brunt: the S&P 500 and Nasdaq both retreated as investors questioned whether the significant planned AI capital expenditure by major hyperscalers could be justified by returns. 

United Kingdom The UK continued its run as one of the standout markets of early 2026. The FTSE 100 reached a new all-time high, buoyed by broader corporate resilience. A record budget surplus in January offered some fiscal reassurance, and inflation fell, raising the potential of a Bank of England rate cut in March.

Europe European equities continue to benefit from rotation out of US growth stocks. The region's more value-oriented market structure proved well-suited to the prevailing style preferences of February.

Asia (ex-Japan) AI-related supply chains and commodity strength provided tailwinds for returns. China's recovery from its earlier de-rating continued steadily, supported by domestic stimulus measures and improving sentiment.

Japan Sanae Takaichi's landslide general election victory was well received by markets. Her platform of "responsible yet aggressive fiscal policy" energised the Topix, which posted a remarkable gain for the month. Japan's combination of corporate reform momentum and renewed political clarity continues to attract international capital.

Emerging Markets Emerging markets were one of the top-performing asset classes globally during the month, driven by AI-related tech surges in Asia, commodity strength, improving earnings expectations, inflows, and a supportive weaker U.S. dollar environment.

Monthly and long-term performance snapshot

The table below provides a snapshot of unhedged index fund investment returns across a range of asset classes and regional exposures, measured in sterling terms.

The chart compares one-month, one-year and three-year sterling returns across these asset classes, sorted by February’s performance. The divergence between assets is striking. Real assets dominated the top of the table, with Global Real Estate (+10.0%), Brent Crude Oil (+9.5%) and UK Equity (+6.6%) leading the pack.

At the other end, Physical Silver (-21.2%) continued its extraordinary reversal from multi-decade highs. US Equity (+0.3%) languished near the foot of the table, a sharp contrast to its dominant position in the multi-year rankings.

Past performance is shown for context only. Returns are measured in sterling.

The AI spending reckoning & US tech rotation

Overshadowed by the weekend's geopolitical drama, the more consequential investment story of February may prove to be the one that unfolded quietly across the month: a steady loss of confidence in US mega-cap technology. When the major hyperscalers revealed combined AI capital expenditure plans of $660bn for 2026, the market's reaction was telling, rather than applause, it prompted hard questions about when, and whether, returns would justify the outlay. At the same time, newer AI entrants continued to chip away at assumptions about the durability of the incumbents' competitive advantages.

The rotation that followed was unambiguous. MSCI World Value outpaced MSCI World Growth, and the US equity market lagged virtually every other major region by a meaningful margin.  European equities, UK equities, and Asian markets all posted meaningfully stronger returns. The multi-year concentration risk in US growth assets, long flagged as a structural vulnerability, began to materialise.

For investors with globally diversified portfolios, February was a vindication. For those with heavy US technology tilts, it served as a reminder that market leadership rotates.

Geopolitical shock: Iran, oil, and the risk-off reflex

Dramatic as it was, the US-Israel military action against Iran in the early hours of 28th February did not arrive entirely without warning. Talks over Iranian de-nuclearisation had collapsed the previous Thursday, and by that point markets were already factoring in a meaningful probability of conflict. 

When the strikes came, markets responded predictably. Brent Crude finished the month at its highest point, gold extended its recovery from January's dip, and government bonds rallied as capital sought shelter. UK Gilts and US Treasuries both benefited from the flight to safety, while sterling softened against major currencies as investors weighed the prospect of lower UK rates alongside broader risk aversion.

What happens to energy markets from here is harder to call. The near-term assumption, a spike in oil prices is widely shared. Less discussed, but worth considering, is the possibility that a lasting resolution of the Iranian nuclear question, whatever political settlement that may involve, could prove deflationary for energy over a longer timeframe.

Real assets are back on everyone's radar

Real assets were the headline performers. Global Real Estate led, and oil was close behind. Gold's steady recovery reinforces its role as a portfolio anchor in uncertain times. Silver was the notable outlier, its dramatic decline from January's historic highs is a reminder that momentum-driven rallies in commodities can reverse sharply.

February was broadly positive for real estate equities amid stabilising economic conditions, lower/falling interest rates in some regions, and rebounding demand in sectors like industrial/logistics and office leasing. U.S. REITs appeared to drive much of the outperformance globally, benefiting from sector rotation and positive sentiment.

What stands out for investors

• Energy markets are highly sensitive to geopolitical escalation.

• US growth and inflation dynamics complicate the interest rate outlook.

• AI enthusiasm is transitioning into valuation discipline.

• Diversification beyond the US is being rewarded.

• Bonds are reasserting their defensive role in portfolios. 

In summary

February was a month where geopolitics and macroeconomics converged. The Middle East conflict may generate short-term volatility, particularly in energy markets, but long-term investment outcomes will continue to be driven by growth, inflation, earnings, and policy direction.

Diversified investors saw meaningful rewards from non-US equities, real assets, and government bonds. The conditions that drove this broadening, US fiscal stress, stretched technology valuations, and a global search for value have not been resolved by February's events. If anything, elevated energy prices and persistent US inflation make the Federal Reserve's task harder, and the case for international diversification more compelling.

The geopolitical situation in the Middle East will evolve in ways that are difficult to forecast. What history suggests, however, is that patient investors who resist the impulse to reposition radically in response to short-term shocks tend to be rewarded. The portfolio themes that made sense in January, broad diversification, real asset exposure, non-US equity allocation, and quality bonds remain as relevant as ever entering March.

Disclaimer: This commentary is for informational purposes only and reflects general market observations. It does not constitute investment advice, a recommendation, or an invitation to engage in any investment activity. Everyone’s situation is different, so if you are unsure about a decision, it’s important to seek guidance from a qualified financial professional.

The views, forecasts, and figures included reflect analysis at the time of writing, unless otherwise stated. sources used are believed to be reliable, but markets and circumstances can change quickly, which means our views may also evolve over time.