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Timeline Q1 Investment Update

By Timeline 20 Apr 2026
11 min read
AC

Alex Crowther

Senior Investment Analyst
RB

Reva Bala

Investment Analyst

Our investment team hosted their Q1 2026 update for financial advisers, walking through the key macroeconomic themes of the quarter - from geopolitical tensions in the Gulf to shifting central bank policy, and how these events translated into asset class performance across equities, fixed income and factors.

What we covered

The session moved through three main areas: a macroeconomic backdrop focused on the impact of the conflict in the Gulf, a deep-dive into Q1 asset class returns across equities and fixed income, and a look at longer-term factor performance patterns.

The Strait of Hormuz

Disruption to global energy supply and the ripple effects on oil and LNG prices

Market volatility

VIX levels in historical context - and why they've been lower than many expected

Central banks

Why the US, UK and Europe all held rates, and what that signals for the year ahead

Equity markets

Regional performance across US, UK, Europe, Japan and emerging markets in Q1

Fixed income

Rising gilt yields, inflation-linked bonds and the role of diversification

Factor performance

Value and small cap versus growth - and what drove the divergence this quarter


The macro backdrop

Q1 2026 was defined by one overriding theme: the conflict involving Iran and its effect on the Strait of Hormuz. Around 20 million barrels of oil pass through this narrow passage daily - roughly 25% of the world's seaborne oil trade - and the disruption sent Brent crude soaring towards $120 a barrel at its peak, approaching levels not seen since 2008.

Beyond oil, the strait carries 20% of global LNG supply, and critical agricultural chemicals such as urea and sulphur also move through the region, creating knock-on effects for global food prices and supply chains.

"Even if the strait were unblocked tomorrow, damaged and shuttered production infrastructure means it will take time before capacity returns to the levels global demand requires - pointing to elevated energy prices for an extended period."

On inflation, the UK CPI had been falling steadily heading into the year. The energy shock has reversed that trajectory, with KPMG forecasting UK CPI at around 3.6% by year-end and some projections running as high as 4%. Central banks - including the Bank of England, the Fed and the ECB - all held rates at their March meetings, but the surprise came from the BoE dropping its previous guidance around future cuts, triggering an aggressive sell-off in short-dated gilts.


Audience sentiment: the polls

We ran live polls during the webinar to gauge how advisers are thinking about markets right now. Here's what attendees said:

Will oil prices stay above $100/barrel in 2026?

Yes, settle at $100+ ~45%

No, prices will come down ~30%

Unsure / too early to say ~25%

How will 2026 end for markets?

Small dip, but positive year-end 75%

Bear market year ~15%

Stronger end to the year ~10%

Which region will lead equity markets in 2026?

US 61%

Europe 16%

Asia 8%


Asset class performance in Q1

Q1 started positively - January felt relatively stable with supportive sentiment and manageable inflation. As the quarter progressed, geopolitical tensions reshaped the picture.

Equities: US equities hit record highs early, driven by technology and strong earnings, before a broader rotation away from large-cap tech took hold. UK equities eked out modest gains, supported by energy and mining exposure, though domestic companies continued to feel the strain of higher rates and weaker consumer confidence. European equities had a mixed-to-slightly-negative quarter; Japan was a relative standout, buoyed by governance improvements and corporate earnings. Emerging markets stayed positive but returns were more muted than the previous quarter.

Fixed income: UK gilt yields rose sharply - reaching multi-year highs at the longer end of the curve - as inflation concerns resurfaced and rate cut expectations were repriced. US and European bonds followed a similar pattern. Credit markets held up relatively well, with income helping to offset price pressure.

Factors: Value and small cap outperformed growth in Q1. Large-cap technology stocks came under valuation pressure, while value's exposure to energy and financials proved supportive given higher commodity prices.


The long-term perspective

Despite the noise of the quarter, the five-year picture across equities remains strong - particularly for US markets, where resilient earnings and technology leadership have driven cumulative returns. The message from the team was consistent throughout: short-term volatility is a normal feature of investing, not a reason to change course.

Time in the market beats timing the market. Staying invested, remaining diversified, and focusing on long-term objectives has historically been the most reliable path - and this quarter is a reminder of why that holds true even during periods of uncertainty.


Questions from advisers

One of the most popular questions at the end of the session was: why hold fixed income rather than cash? Alex addressed this directly - fixed income isn't primarily about minimising drawdown, it's about diversification. Over the long run, fixed income has a low-to-no correlation with equities, making it a valuable complement to equity holdings rather than a substitute for cash. Moving to cash means attempting to time the market, which runs counter to Timeline's core investment philosophy.

Have a question for the team? Email support@timeline.co - they genuinely love hearing from advisers.

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