April 2026

“He waits…that’s what he does…”

Like the publican watching the freshly poured pint of Guinness settle, the markets wait.  They wait for peace or a renewal of hostilities; an inflationary spiral or economic decline; higher rates, or lower rates.  For their part central banks showed that are waiting too.  With a flourish they bequeathed us the “hawkish hold”; a coordinated recognition of the delicate situation they are in.   This boiled down to talking tough but doing nothing.  Given the highly politicized world in which they operate (multiple, conflicting objectives), nobody really thought there was any chance of a bold decision being taken, so what was the point?  If the situation is so delicate that decisiveness is too difficult, maybe humans are too delicate to be making those decisions, and we should be setting our monetary policy in a more objective manner.  Given the potentially wide array of economic outcomes we might face, would a 25bp move in rates have made any difference anyway? In the meantime, the market is left to wait and ponder whether those humans will remake the mistakes of 2021 or of 2007?

After the shock of March, a more measured tone returned to risk assets.  In the absence of reliable economic data, earnings reports were scoured for signs of forward guidance.  The AI juggernaut continued to thunder along, although elsewhere results were more varied as different sectors dealt with the consequences of higher energy prices and demand disruption.  For their part, results from banks also yielded disparities, as those with considerable presence in markets businesses (mostly US banks) benefited tremendously from the volatility even as the level of provisioning increased.  That provisioning was primarily linked to private credit, but there was also predictable leakage into traditional loan portfolios.  This was less evident in Europe, where banks posted solid results albeit with less robust trading results.  As an aside, the trade press still seems fixated on the read-across US investment banking results to the European rivals, only to be perpetually disappointed, Charlie Brown-like, when the football is once again pulled away, showing continued US outperformance.

With the tone generally more constructive the fund’s A shares recovered, gaining +1.17%.  Performance across asset classes was uneven but the portfolio had contributions of +1.4% from credit (mostly AT1s) and -0.2% from equities.  Looking forward, we retain our core belief that the market remains unsettled and vulnerable.  This is likely to persist for the next few months regardless of outcomes in the Iranian stalemate, because of the economic deterioration that has taken place in the intervening period.  We remain well-placed for this, and importantly the opportunities that will present themselves beyond that.