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Executive Summary

Market review

Markets experienced a more volatile February amid AI-related uncertainty and rising geopolitical tensions, though economic growth across major economies remained broadly resilient.

Which assets performed well? 

Rotation beyond U.S. – Investors rotated into Asian equities, with Korea’s KOSPI index leading gains as capital moved away from crowded U.S. tech positions. Gold rose 7.9% as geopolitical risks increased demand for defensive assets.

Which assets struggled?

Tech and crypto lagged – Technology-heavy indices and cryptocurrencies declined as investors took profits.

 

Stability Amid VUCA

Geopolitical uncertainties & markets

US–Israeli strikes on Iran and the risk of retaliation around the Strait of Hormuz have raised concerns over potential disruption to a key global oil shipping route. So far, market reactions have been consistent with historical patterns, where geopolitical shocks create short-term volatility but limited lasting impact. Our current base case is that the situation stays relatively contained, with Iran avoiding full escalation and the U.S. seeking to limit the economic fallout. We entered this period positioned more defensively, with downside hedges and gold helping to diversify portfolios and manage volatility during geopolitical stress.

Economic Growth

Risk of more meaningful disruptions? Time to be selective

Energy markets look to be the key risk in this conflict: the Strait of Hormuz, handles roughly 20% of global oil supply, meaning disruptions could quickly tighten global energy markets. Recent declines in tanker traffic and shipping activity highlight the risk that prolonged disruptions could push oil prices higher and add to renewed inflation pressures A sustained rise in oil prices could lead to inflationary pressures and delay monetary easing. We are watching key signposts that could signal broader market disruption: prolonged conflict, damage to energy infrastructure, and disruptions to shipping through the Strait of Hormuz.

 

Vuca

From easy to selective income

Tighter credit spreads (higher valuation) mean investors are less compensated for taking credit risk, making careful selection more important in 2026.

  • Preference for shorter-duration bonds – Targeting 2–5 year maturities helps capture attractive yields while reducing sensitivity to interest rate volatility.
  • Quality credit remains attractive – Investment-grade corporate bonds continue to offer compelling risk-adjusted income with yields still elevated compared to history.
  • Diversify income sources – Alternative income strategies can provide resilient and uncorrelated income alongside traditional credit.

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