Please see the below article from Tatton Investment Management discussing resilient equity markets despite rising geopolitical, energy and interest‑rate risks, received this morning – 27/04/2026.
Resilient equity markets, rising risks
Risks have risen but stocks are little changed. Middle Eastern ceasefires have been nominally extended but the Strait of Hormuz remains closed. Both the US and Iran are conducting operations in the waterway – resulting in a tense stalemate. If Trump is right about Iranian “infighting”, negotiations will be slow. But any power struggle could easily end up with a strengthened, more hardline IRGC, making regime outcomes even less predictable. Steadily rising oil prices reflect the fact that the current stalemate isn’t economically sustainable. The risk to equities creeps higher the longer it remains.
Rising bond yields are another risk for equities. Ahead of this week’s rate decisions across the developed world, interest rate expectations rose last week. However, this was more about robust global growth signals than energy prices per se. The UK is case in point: commentary focusses on higher input costs, but UK business confidence is proving resilient. The Bank of England will probably have to pivot tighter, but that’s because growth looks stronger. Global growth looks resilient, which is a challenge for long-term bonds. As the challenge comes from growth, though, it should still mean a decent outcome for equities.
Earnings growth continues to be strong too – even in Europe, where most other data looks negative. Poor European confidence numbers are probably more accurate than backwards-looking earnings, but we should keep an eye on them for more clues. Global resilience puts markets back to where they were last summer: panic about policy (tariffs then, war now) but with earnings still ticking along.
Other risks are receding too. Kevin Warsh will become Federal Reserve Chair after the US Department of Justice dropped its probe into current chair Powell – helping bond yields fall. Warsh dismissed claims he would take monetary policy cues from Trump last week. Even if the president does something market-moving this weekend, history tells us that the economy can ignore the noise.
Business sentiment holds strong
April’s flash PMIs (purchasing managers’ indices, measuring business sentiment) were surprisingly strong, proving companies are resilient to the energy shock. The US (52), UK (52) and Japan (52.4) reported expansion, while the Eurozone (48.6) was the only disappointment. This strength was driven by manufacturers riding a wave of investment – defence spending in Europe and AI capex in the US. It’s a reversal of last year, when global growth was powered by consumption. Public and private investment taking the impetus is good news, since this investment should be more resistant to energy prices.
UK PMIs were significantly better than expected, despite a sharp rise in reported input costs. The inflation component has led some to question the UK figures, and whether they might be revised down (as flash PMIs often are). The pessimistic view is backed up by the CBI’s business confidence numbers, which show a sharp drop in manufacturing sentiment – in contrast to the positive manufacturing PMI (from S&P). CBI surveys have suffered low response rates in recent years, so we would lean more on S&P’s data. Coverage of the UK continues to be negative, highlighting inflation and potential interest rate hikes – but we stress this is about better-than-expected growth.
Europe stands out for the wrong reasons, with a dreary 47.4 PMI for the Eurozone services sector. This data is heavily focussed on French and German companies, and we’ve known for a while that Europe’s two largest economies are its weakest. Periphery growth is better, but not captured by the PMI. We should also note that manufacturing was stronger than expected – proving that defence spending is working. It’s not enough to counteract the oil shock right now, but it’s still a good sign. European confidence is understandably weak but, if the Iran war is resolved, there is enough momentum to get growth back on track.
Europe gets a Magyar boost
Viktor Orbán’s historic election loss could be a turning point for Europe. Incoming Prime Minister Péter Magyar wants to repair Hungary’s relationship with Europe and markets approve: the forint climbed against the euro and Hungarian stocks shot up, in the hope that Magyar will unlock €17bn in EU funds frozen over rule of law concerns.
The broader reaction for Europe was more muted. The euro gained a little after the election and European stocks rose, but that was more about easing Iran tensions. Investors took Orbán’s departure as a mild positive for Europe, without overreacting.
It is a clear benefit for Hungarian equities, which trade at lower price-to-earnings valuations than Polish and Czech peers after decades of corruption and economic stagnation. The cautious reaction for broader Europe makes sense too, since significant barriers to European integration remain (pro-Russian Rumen Radev just won Bulgaria’s snap election). Orbán has repeatedly obstructed European integration over the years but he’s far from the only obstruction. Even the core EU nations regularly disagree – exemplified by Chancellor Merz’s attack on UniCredit for its attempted takeover of Commerzbank. These disagreements have been a barrier to the all-important Savings and Investment Union.
Magyar’s victory is still symbolic for wider Europe. The $90bn of aid to Ukraine, now likely to be approved, could pave the way for alignment in defence spending and other areas – with downstream effects on growth. That’s why the unanimity requirement in EU foreign policy is still an economic issue. Orbán’s departure is not straightforwardly about right-versus-left politics; Magyar himself is a former Fidesz member. Rather, it shows that the specific brand of obstructive anti-European populism is less viable. Europe’s populists will likely be inclined to take the more conciliatory approach of Italy’s Meloni from here. That will lead to incremental improvements for European integration. Over time, these make a big difference.
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Marcus Blenkinsop
27th April 2026