Please see the below article from Tatton Investment Management detailing their discussions on markets over the past week. Received this morning 07/04/2026.
A seasonal central bank pivot
We start April, and the new quarter, still very much dealing with the consequences of March. Both equity and bond prices are better since the close on the last Friday in March. Perhaps surprisingly given that the spot Brent crude oil price is back above $111 per barrel, equity indices are a little better than last Thursday’s close. However, bond prices are weaker (and yields higher). The situation remains as febrile as at any point since the conflict began, with Trump’s deadline for an effective ceasefire set for Wednesday 1am BST. It does not seem likely that Iran will acquiesce.
Time is not on our side. With less than 10% of the usual shipping flow through the Straits of Hormuz, oil and gas reserves are coming under increasing pressure — particularly for Asian buyers. European diesel prices have topped €150 per barrel equivalent, double February’s levels and approaching the 2022 peak.
There has been some “good” news from central bankers this week, even if it didn’t necessarily sound that way. The Bank of England had been perceived as one of the most hawkish rate setters in this cost shock environment. On Wednesday, Andrew Bailey told Reuters that businesses currently have less ability to raise prices, and that the Bank must act in a way that doesn’t harm the economy or jobs. Of rate hike pricing, he said markets are “getting ahead of themselves.”
The noises from western central bankers have generally been less hawkish, reflecting growing concern about growth. Markets were most under pressure when funding liquidity was particularly tight early last week, as hedge funds appeared to be offloading risk positions. Things have since eased a little, with US and European high yield credit spreads around 30 basis points below their March peak.
At Tatton, we do not pretend to be geopolitical experts. Economic and financial system outcomes tend to be structural, while political outcomes derive from a relatively small number of decisions that can change quickly. The narrative will tend to present “worse-and-worser” cases — and these are only realised when problem-solving fails.
Investors have navigated many crises over the past twenty years. Perhaps they have not become complacent, but rather more realistic about the inherent positive skew in longer-term outcomes.
Using MSCI Developed World Index data since 1970, a monthly fall of 5% has occurred 61 times. The following six months have averaged a return of +4.3% across all such occasions — a reminder that the long-term return path has remained quite consistent, even if volatile in the shorter term.
Market asset returns review
Overall, March will rank as a bad month for both bonds and equities. Using the MSCI World Index as a guide, global equity performance of -5.4% places it in the bottom 10% of months since 1970. Global bonds provided some offset but still did not have a great month.
Almost everything changed the day after February markets closed. Israel and the US began the Iran campaign over the last weekend of February, and both equity and bond markets opened March trading with an immediate fall. The pattern of major weekend US-Israeli actions repeated throughout the month, leaving investors especially nervous on Fridays.
Initially, investors suspected this might resemble the 12-day war of March 2024. However, Iran’s resilient ability to reestablish command structures, halt shipping in the Straits of Hormuz, and launch damaging attacks on Gulf infrastructure changed perceptions continuously. Oil and gas prices surged to their monthly peak on the 19th, though both sides subsequently backed off the strategy of creating longer-term damage to one another.
Despite a clear move in the second half of March from Trump’s administration to seek a negotiated exit, it was only at month’s close that investors sensed a shorter-term path to the end of hostilities — and, most importantly, a resumption of oil and gas tanker shipments.
In some senses, markets fared better than one might expect. Initially, investors focused on the inflationary consequences, with bond yields rising sharply — most acutely in UK gilts, where traders suspected the UK was both more inflation-prone and fiscally more exposed to energy price rises. The major central banks kept rates unchanged but were deemed somewhat hawkish, which worsened trading liquidity. The most active participants throughout the month were hedge funds, whose large positions required significant borrowing; as borrowing costs rose, positions were reduced regardless of profitability.
US equities fell considerably less than other regions. Europe, developed Asia and emerging markets were all under greater pressure, reflecting both prior hedge fund positioning and genuine fossil fuel supply sensitivity.
Gold, having performed well as geopolitical risks were rising, fell as those risks became reality — likely a combination of leveraged speculation unwinding and liquidity needs from Middle Eastern sovereign wealth funds. The price stabilised at around $4,500.
Markets personified – insight article
Investment professionals often talk about capital markets as though they are people, with beliefs, expectations and even desires. Markets might “expect” lower interest rates or get “excited” about fiscal stimulus. This personification is ubiquitous in financial media — and in the words of philosophers Lakoff and Johnson, it is one of the “Metaphors We Live By” in the investment industry. So why do we do it?
The most famous example comes from Ben Graham’s 1949 book, The Intelligent Investor. Graham likens markets to a manic-depressive business partner called Mr Market, who in his manic episodes pays a premium for your shares, and in his depressive episodes sells his own at a discount. The calm investor can profit from his mood swings.
It is tempting to think this is just a useful analogy. Some even argue it could be socially harmful, by removing autonomy from individuals in favour of some amorphous will of the market. But it would be wrong to think of markets’ beliefs or desires as mere fiction.
Markets are dynamic information processing systems — one of the central ideas of Austrian economist Friedrich Hayek, who argued that market prices reflect the aggregate of all participants’ local and limited knowledge through a process of “spontaneous order”. This idea was highly influential on the Efficient Markets Hypothesis, which holds that it is exceptionally hard for individuals to consistently beat the market, because prices already reflect all available information.
Whether markets truly have beliefs or intentions depends partly on what you think beliefs and intentions are. Philosopher Dan Dennett argued that we can describe any system as if it has beliefs and desires, but this description is only genuinely useful for certain systems — humans, animals, governments, computers. Markets, I would argue, belong in that category.
Viewing financial markets as having beliefs — based on aggregate probabilities of future outcomes — is a very good way of predicting how they will react to new information. That does not mean what the market “thinks” is always rational or consistent. But then, are people any different? Most people predictably behave according to what they want and believe most of the time. The same, it turns out, is true for markets.
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Alex Clare
07/04/2026