GEOPOLITICS AND MARKET SEASONALITY COLLIDE

The first two months of 2026 have been unusually turbulent. Ordinarily, markets at this time of year benefit from the tail-end of the seasonal upswing, supported by improving liquidity and resilient sentiment. However, just as in previous years when unexpected events distorted the usual rhythm, the dramatic escalation in the Middle East—culminating in joint US‑Israeli strikes on Iran—has shifted the market narrative entirely.

While seasonal forces typically offer a supportive backdrop from October through April, unfolding geopolitical events have, once again, overridden these patterns. Much like the tariff shock of “Liberation Day” last spring, the weekend’s military action has introduced a level of uncertainty that markets cannot easily digest. As a result, 2026 has begun not with the smooth continuation of the winter rally, but with a sharp divergence between what seasonality suggested should happen—and what the reality of global politics has delivered.

MACRO LANDSCAPE: AN ABRUPT SHIFT IN RISK APPETITE

The strikes on Iranian infrastructure have intensified the sense of fragility already present in global markets. Even prior to the military action, the macro data had begun to deteriorate at the margins: softer manufacturing numbers in Europe, uneven US consumer momentum, and renewed questions around Chinese policy support.

The Middle East escalation has amplified all of this.

Energy markets have moved quickly: the threat—real or perceived—to the Strait of Hormuz, through which roughly a quarter of global oil and gas transits, has pushed crude sharply higher. As with previous chokepoint scares, the concern is less about immediate scarcity and more about the inflationary impulse that could ripple across already‑strained supply chains.

Safe‑haven flows have accelerated. Gold has broken to new highs in real terms, continuing the pattern we have seen over the last 18 months, in which it acts as a hedge against both geopolitical instability and currency debasement narratives.

Meanwhile, equity volatility has risen meaningfully. Markets, particularly in Europe and the UK, have reacted with unease—though history tells us that geopolitical shocks typically cause sharp drawdowns followed by equally sharp recoveries once clarity returns. The question is not whether markets can absorb these events—they generally can—but how deep the near‑term retrenchment might be before calm reasserts itself.

WHERE WE STAND: VALUATION, CYCLES AND RISK MANAGEMENT

To think solely in geopolitical terms would be misleading. Our decision‑making is grounded in the
interplay of geopolitics, macro data, valuations, company fundamentals, and market cycles.

Even before the recent escalation, equity valuations—particularly in the US—were becoming stretched. Earnings expectations had risen, but so had the market’s willingness to punish even minor disappointments. We noted throughout late 2025 that shares missing forecasts by a fraction were being sold aggressively, while those beating expectations were only marginally rewarded. This asymmetry is typical when markets are fully priced. As a result we had already adopted a more conservative approach and had taken an underweight equity position.

In that sense, the current downturn is not solely about geopolitics; rather, geopolitics has exposed fragility that already existed.

Similarly, bond markets have begun to price in a slower pace of central bank easing. While the Federal Reserve still appears poised to cut rates this year, its increasing caution around embedded inflation contrasts with the Bank of England’s more unconventional posture. This divergence introduces additional currency and duration considerations that must be navigated carefully.

PORTFOLIO POSITIONING: ANCHORS IN A STORM

Against this backdrop, our portfolios are deliberately structured with resilience in mind. The combination of weakened seasonality, overextended valuations, and geopolitical tensions made our previous de‑risking both prudent and timely.

UK EQUITIES

The FTSE 100 has significant exposure to travel, banking, luxury goods, and commodities-linked sectors (e.g., airlines and banks sold off sharply this week). These sectors are highly sensitive to geopolitical uncertainty and rising costs.

In contrast, while energy companies within the FTSE did gain from higher oil prices, the overall index weighting wasn’t enough to offset broader selling pressure on cyclical sectors.

THE US MARKET

The S&P 500 has also been affected, with futures and stocks lower amid global risk aversion and oil price spikes.

But U.S. markets have shown greater resilience this week in part because:

• They include more large-cap defensive and technology stocks that have held up better so far (helping dampen index declines).

• The U.S. Dollar and Treasuries have acted as safe havens, softening the downward pressure relative to European indexes.

GLOBAL SELL OFF

Over the last few sessions data from market feeds shows the FTSE 100 down noticeably on the week, with one of its largest single-day drops in months, while the S&P 500’s sell-off, though real, has been smaller in percentage terms for now.

In simple terms: both indices are down in response to the same shock, but the UK/European benchmark has fallen more this week. This is largely due to how different sectors react and how risk sentiment has shifted in currencies and central bank expectations.

GOLD AND COMMODITIES

Our long-standing allocation to gold continues to perform its role with precision. It offers both a hedge against inflation shocks and a counterweight to equity volatility in moments such as these.

GLOBAL DIVERSIFICATION

We entered 2026 with broad exposure across regions and sectors—including measured allocations to AI, infrastructure and emerging markets. More importantly, we deliberately reduced equity exposure over the last two quarters in anticipation of heightened volatility. This forward‑looking shift has served portfolios well.

FIXED INCOME

We have leaned further into high‑quality government and global bonds, improving portfolio defensiveness without sacrificing liquidity or flexibility.

TRADING AND TACTICAL ADJUSTMENTS

As with ongoing our approach, we want to share not just what we have done—but why. Markets are driven by cycles, sentiment shifts, earnings trends, policy decisions and geopolitical risk. Our responsibility is to synthesise these moving parts and respond with conviction.

In the latter half of last year, we took profits from our equity exposure and moved to a tactically underweight position, rotating proceeds into safer positions. This action both preserves gains made during the late‑2025 rally and provides dry powder to redeploy quickly should markets overreact or dislocate in the coming weeks.

Liquidity remains a core pillar of our process. We ensure that portfolios can be repositioned nimbly, allowing us to exploit volatility rather than be victim to it.

We will be taking advantage of the opportunities that this lasts volatility presents and making active changes in the portfolios.

SUMMARY: DISCIPLINE OVER NOISE

Market turbulence—whether driven by geopolitics or valuations—is never comfortable. Yet the lesson from decades of market history is consistent: portfolios grounded in diversification, discipline and proactive risk management endure and ultimately thrive.

Over the past 12 months, our allocations have consistently outperformed peers across the wealth management industry. We protected value more effectively during the sell-off in early 2025 and participated strongly in the recovery that followed. This is the practical expression of active management.

Whether the coming weeks bring escalation or resolution, our approach remains unchanged:

• Stay disciplined
• Stay prepared
• Stay focused on long‑term outcomes

Markets have faced 42 major geopolitical flashpoints since 1956. In almost every case, diversified portfolios that “stayed the course” saw positive returns in the subsequent 6 to 12 months. We will be looking for opportunities that this volatility creates. What will remain constant is our disciplined approach. We will continue to endeavour to protect and grow our clients’ portfolios prudently, avoiding the temptations of short-term speculation.

We are grateful for your continued trust with the stewardship of your investments.