Summary points

A higher nominal world has emerged, driven by persistent fiscal deficits, rising protectionism and competitive currency devaluations leading to a higher equilibrium for inflation & interest rates.
In the fourth quarter, global activity remained resilient, holding up despite renewed tariff pressures and persistent geopolitical tensions.
The US economy saw moderate growth, eas-ing inflation pressures, rising policy and trade uncertainty.
European conditions improved modestly, though recovery remained uneven amid trade distortions, tighter fiscal policy and industrial softness.
China and Asia faced late-cycle slowing growth and disinflation, with China still tracking 5%.
Despite persistent uncertainty, 2025 proved constructive for multi-asset investors, with global equities posting strong double-digit gains, duration supported by peaking policy rates, and a weaker dollar boosting gold and non-US risk assets.
Conclusion: With a severe recession unlikely, the positive bias on risky assets persists, despite increased volatility and potential conflicts under the Trump administration in the coming months. We emphasise capital preservation with opportunistic positioning, viewing rising volatility and dispersion across markets and sectors as catalysts for active management to capture alpha. Credit investments, particularly loans and non-cyclical short-term high-yield bonds offering 7–9% yields, remain preferred. We maintain a constructive stance on equities, where the current market environment favours an absolute return strategy over a traditional relative value approach.

We invite you to review our complete 1st quarter 2026 investment letter, which includes a more detailed look at the regional macroeconomic backdrop, market consensus forecasts, and more.

Quarterly investment letter – 1st quarter 2026

Summary points