Q1: Quarterly Investment Review
Independent planning for families, trustees and business owners
Markets and finances at a glance
At Oakcrest Private Office, we focus on clear, long-term planning built around real lives, not headlines. In this quarter’s review, we look at what shaped markets in Q1 2026, and what higher energy prices, shifting rate expectations and a more fragile risk backdrop meant for investors. We also look at how those forces played out across equities, bonds, and commodities in the major markets.
Q1 2026: Energy shock, softer equities, narrower rate-cut hopes
If you only read one thing: Conflict in the Middle East dominated Q1, pushing Brent above US$110/bbl and helping drive the S&P GSCI +40% in US dollar terms. Global equities fell, government bonds also sold off as inflation worries resurfaced, and the S&P 500 fell 4.3% in its weakest quarter since 2022. The US held up better than some peers, Europe ex-UK fell 2.18% in EUR terms, emerging markets were slightly negative overall, and Japan proved relatively resilient.
UK - large caps did the lifting; rate hopes faded
What happened: UK equities delivered a positive return in Q1, with the FTSE All-Share up and large caps outperforming the FTSE 250. Leadership came from energy, basic materials, telecoms and healthcare, while technology and consumer discretionary lagged. The Bank of England held Bank Rate at 3.75% in March, UK inflation was 3.0% in February, and GDP growth was just 0.1% year-on-year in Q4 2025.
Our take: The UK’s sector mix did more of the heavy lifting than domestic momentum. When energy, income and defensives are leading, the index can look firmer than the economy beneath it.
What we saw in positioning: Internationally diversified UK companies, dependable cash generation and selective commodity-linked exposure stayed in favour. With rate-cut expectations pushed back, quality income still earned its place.
Crowd check: The UK “value” story still has support, but Q1 again suggested that balance-sheet strength and cash discipline mattered more than cheapness alone.
US - volatility returned; software lost altitude
What happened: The S&P 500 fell 4.3% in Q1, its weakest quarter since 2022. Early resilience gave way as hopes of rate cuts were pushed back and higher oil prices unsettled risk appetite. Energy and basic materials outperformed, while software lagged as leadership rotated toward AI infrastructure, semiconductors, and cloud and data centre beneficiaries. The Fed held rates at 3.5%–3.75% through the quarter.
Our take: The US market did not look broken; it looked more selective. Leadership narrowed between businesses still benefiting from AI-related capex and those where valuation or business-model pressure became harder to ignore.
What we saw in positioning: Broad exposure looked more sensible than concentration. Valuations eased, but the earnings backdrop remained supportive, with Q1 S&P 500 earnings expected to rise 12.6% year-on-year on 9.8% revenue growth.
If markets are wrong: If oil settles and inflation cools faster than feared, some of the quarter’s defensive rotation could unwind. If not, or if guidance withdrawals broaden, the second half may prove less straightforward than headline earnings forecasts suggest.
Europe (ex-UK) - energy led as inflation worries returned
What happened: The MSCI Europe ex UK fell 2.18% in Q1 (EUR). Weakness was concentrated in March as higher oil prices unsettled sentiment. Energy outperformed, while consumer discretionary and software lagged. The European Central Bank left rates unchanged, euro area inflation rose from 1.9% in February to 2.5% in March, and the flash composite Purchasing Managers' Index eased to 50.5 from 51.9.
Our take: Europe remained a selective market. The quarter favoured energy exposure, steadier cash-generative businesses and parts of the market tied to global capex, while more cyclical areas found the going harder.
What we saw in positioning: Quality balance sheets, dependable earnings and valuation discipline mattered more than broad regional enthusiasm once oil moved back into the inflation story.
If things go the other way: If energy prices settle, Europe could regain some footing. If not, the region’s reliance on imported energy may keep both markets and policymakers cautious.
Emerging markets & Asia - AI strength met an oil shock
What happened: EM was slightly negative in Q1 but still outperformed developed markets overall. Korea and Taiwan led early on AI-related demand in semiconductors and memory, but higher oil prices and supply disruption reversed sentiment in March, hitting energy-importing markets harder. Latin America held up better, while China and India lagged. Asia ex-Japan finished the quarter negative overall, while Japan proved more resilient.
Our take: The quarter again favoured selectivity over blanket exposure. EM still offers some of the clearest beneficiaries of AI-related capex, but it remains sensitive to oil, the dollar and global risk appetite.
What we saw in positioning: North Asia’s tech supply chains stayed central. More than 70% of 2025 world exports of semiconductors and AI hardware came from emerging markets, and the technology weight in the MSCI EM index has risen from around 14% a decade ago to 27% today.
On the radar: Oil, the US dollar and supply-chain resilience remain the key swing factors for EM sentiment.
How we’re positioned
Equities: Diversification, selective sector exposure and energy sensitivity mattered more in Q1. Leadership rotated toward energy, materials and AI infrastructure, while the US stayed relatively resilient and parts of EM remained supported by structural AI demand.
Bonds: Government bonds were less protective in Q1 as higher oil prices pushed yields up. US Treasuries held up better than European government bonds and gilts, while shorter-dated, higher-quality exposure proved more resilient than long-duration. JPMorgan noted a neutral duration of around 6.2 years.
Inflation & real assets: Commodities led in Q1, with the S&P GSCI +40% in US dollar terms and Brent above US$110/bbl by quarter-end. Precious metals were positive overall, though weaker in March.
What could move markets in Q2 2026
Central banks: Markets will be watching whether the Q1 energy shock delays rate cuts further. The Fed held at 3.5%–3.75%, the BoE at 3.75%, and the ECB also stayed on hold in Q1.
Energy markets: Oil and Liquefied Natural Gas remain central. Any further disruption or credible de-escalation is likely to feed quickly into inflation expectations, bond yields, and risk appetite.
Technology leadership: The divide between AI infrastructure winners and weaker software names remains one of the clearest themes in global equities.
Earnings visibility: Earnings expectations remain constructive, but second-half visibility is less clear. Q1 S&P 500 earnings are expected to grow 12.6% on 9.8% revenue growth.
Commodities & FX: Oil, precious metals and the US dollar remain important swing factors, especially for emerging markets.
Risk appetite: Q1 showed how quickly geopolitical stress can reset sentiment across both equities and bonds. Markets are signalling caution, not panic.
Key dates (subject to change)
UK - Bank of England (MPC): 30th Apr & 18th Jun • CPI: Mar (22nd Apr), Apr (20th May) & May (17th Jun)
US - Federal Reserve (FOMC): 28-29 Apr & 16-17 Jun • CPI: Mar (10th Apr), Apr (12th May) & May (10th Jun)
Euro area - ECB: 29-30 Apr & 10-11 Jun • HICP: flash late-month Apr/May/Jun; final mid-month following release
Quarterly performance statistics
UK:FTSE 100 +3.4%, FTSE All-Share+2.4% and FTSE 250-5.1% in Q1 (GBP total return). Leadership came from energy, basic materials, telecoms and healthcare. UK inflation was 3.0% in February; the BoE held at 3.75% in March.
US:S&P 500 -4.3% and Nasdaq 100 -5.8% in Q1 (total return). Energy and materials led; software lagged as leadership rotated toward AI infrastructure. The Fed held at 3.5%–3.75%. Q1 earnings growth is expected at 12.6% on 9.8% revenue growth.
Europe ex-UK:MSCI Europe ex-UK-2.18% in Q1 (EUR, gross returns); +20.44% in 2025. Energy led; consumer discretionary and software weakened. Euro area inflation was 2.5% in March; the ECB deposit rate stayed at 2.0%.
EM/Asia:MSCI AC Asia ex Japan -1.13% in Q1 (USD, gross returns). MSCI EM Asia -1.45% in Q1. Emerging markets were -0.1% overall versus MSCI World -3.5%. Korea and Taiwan led early on AI-related semiconductor demand; China and India lagged; TOPIX rose 3.6%.
Bonds: Q1: Government bonds sold off as higher oil prices revived inflation worries and pushed back rate-cut hopes. UK gilts fell 2.0%, European bonds 0.6%, and Japanese government bonds 1.6%, while US Treasuries were flat. The BoE held at 3.75%, and JPMorgan noted neutral duration around 6.2 years.
Commodities:S&P GSCI +40% in Q1 (US$); the Bloomberg Commodity Index +24.4%. Brent rose above US$110/bbl at quarter-end, up more than 85% YTD, including a 63% rise in March. Gold was up around 19% over the quarter’s shock backdrop, while precious metals overall were positive, though weaker in March.
Bottom line
Higher oil, weaker sentiment and a bond sell-off made Q1 more difficult than expected. But earnings held up better than markets did. For diversified investors, the message remains the same: stay broad, stay selective, stay disciplined.
Tax-free cash at retirement: Useful flexibility, or a decision that needs more thought?
For many people, tax-free cash is one of the more attractive parts of retirement planning. It can open up options at a point when life is beginning to change - repaying debt, easing spending pressures, helping family, or simply creating a greater sense of control over the next stage.
That is exactly why it deserves more thought than it often gets.
It is easy to regard tax-free cash as a reward for reaching retirement, or as money that can be used with relatively little consequence simply because it arrives tax-free. In practice, how it is used can shape liquidity, income strategy, tax efficiency and the resilience of a wider retirement plan.
A familiar private-client question
A common question is whether tax-free cash should be used to clear borrowing or support a change in lifestyle at retirement.
Either can be sensible. Reducing debt could improve monthly cash flow and bring a greater sense of certainty. Equally, using part of that capital to support a deliberate lifestyle change may be entirely appropriate.
Where it becomes more nuanced is in the wider context. A mortgage repayment may reduce outgoings, but it also removes liquidity. Drawing capital early may feel efficient, but it could mean less pension wealth remains invested. This often means fewer options are available later if circumstances or spending needs change.
The real planning question
The issue is not whether tax-free cash can be used, but whether using it strengthens the plan as a whole.
That usually means asking a few broader questions:
Is debt reduction genuinely the best use of capital?
How does the decision affect future income?
Should other assets be used first?
How much liquidity ought to be retained?
How do pension assets sit alongside ISAs, cash, property and estate planning objectives?
This is rarely just a pension decision. More often, it is a wider capital-allocation decision - a surprise for many in later life.
Why this matters
Tax-free cash can be one of the most useful sources of flexibility within a retirement strategy. Its value often lies less in its tax-free status and more in the options it offers, provided those options are used deliberately.
How Oakcrest helps
At Oakcrest, we help clients view these decisions through a 360-degree lens — across pensions, cash, investments, borrowing, tax, and longer-term family priorities — so that choices such as taking tax-free cash are considered as part of a broader strategy rather than in isolation.
We don’t believe in forecasting headlines; instead, we focus on building portfolios and financial plans that can adapt as conditions change. If you’d like to sense-check your current positioning, or discuss how today’s market backdrop fits within your wider family, trust or business plans, we’d be pleased to have a conversation.
Thanks for reading,
Oakcrest Private Office
The content in this article was correct on 14/05/2026.