March – A quarter that felt like a decade
As the first quarter of 2026 comes to a close, the human tragedy sadly goes on. Our thoughts are with our clients and friends in the Middle East that are impacted by the current events. We won’t recount this major geopolitical event, but we will address its impact on the global economy.
All indications led us to believe that we were in for another stellar vintage, until Trump pushed the button. We can’t help but have a feeling of déjà vu. If you recall last year, we were all riding a smooth wave until Trump decided to start imposing tariffs on every country, with no particular logic justifying the various levels (recently ruled out illegal by the Supreme Court), and everything collapsed.
This time around, the strongest movements took place in the commodities market, both up and down (see chart of the month section). While we hope for a quick end to the hostilities, President Trump is now stuck between his inclination to avoid prolonged conflict and his will to get rid of his TACO-trade image (we discussed “Trump Always Chickens Out” in a previous insight letter). Equity markets are clearly pricing a quick end to the conflict, followed by resumption of business as usual.
Data source : Bloomberg
The final figure for the 2025 annual GDP growth just came out at a mere 2%. The US Federal Reserve is clearly also rather optimistic, predicting a similar growth rate for Q1 of this year. Given the current situation, we think there are more chances for 2026 to fare worse rather than better than the previous year. To support our thesis, we see evidence of worsening conditions in the poorer part of the population. Things like student, auto and credit card loan delinquencies are at levels not seen in decades.
So what is keeping the economy afloat, one might ask? Well, the wealth gap in the US is such that the top 20% is responsible for over 60% of the spending. The US is in what economists call a K-shaped economy, where the richest get richer at an increasingly and much faster rate than the poor. This is further exacerbated by inflation, oil and real estate prices going up. Now, if the stock market was to correct, and as a result the richest were to cut spending, both legs of the K would point downward, and this would without a doubt hurt GDP growth.
Other countries are suffering even more than the US, which is, in fact, energy self-sufficient and a net exporter. Europe for instance and some emerging economies are a lot more dependent on the Middle East for oil and gas and are having to tap into their reserves to keep up with the current needs. If the Strait of Hormuz does not reopen soon, a lot of countries will be competing for a limited resource, driving the price up and, as a result, growth down.
House View
March was a very volatile month, swinging violently to the rhythm of President Trump’s social media posts. Another reminder that it is important to stay invested throughout this sort of crisis so as not to miss the rebounds.
Clients that have followed our advice are sleeping well so far. Indeed, we have been positioned rather defensively since last year, and as a result, are barely feeling a pinch this month.
In fact, we have taken advantage of the swings in volatility numerous times this month to structure various products that strive in this sort of environment.
You may have read alarming headlines about the private credit sector in recent weeks. While it can’t be denied that the asset class is under stress at the moment, it should be specified that only a very small sub sector in private credit is taking a hit. As a consequence, some very healthy funds are being forced to gate or are on the verge of it. We like to say that a gate is there to protect investors, not to punish them. It is important to know what private credit funds are investing in and only by doing that can we be reassured that they are well positioned or even benefiting from the current stress to make cheaper acquisitions. Having spoken with all of our funds, we are very comfortable with the way they are invested.
Chart of the month
We find it appropriate to show you how some commodities have reacted compared to one of the most volatile sector of the equity market, the technology sector.
Below, the black curve is the WTI crude oil spot price, which went up over 50% in March. But that move was far from a straight line, in fact there were multiple double-digit swing in single days.
In yellow, we see the gold spot price evolution, which clearly shows that it has not played its safe haven role at all throughout the current crisis. Even worse is silver, in grey, which a lot of people got into earlier this year, down over 20%.
In comparison, the S&P500 the technology sector is reacting relatively mildly, down just under -4%.
Source: Bloomberg
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