Since the beginning of the year, equity markets outside the United States have outperformed the capitalisation-weighted S&P 500. Within the US, however, dispersion has been striking. While the S&P 500 has gained just 0.5% year-to-date, the equal-weighted S&P 500 – which assigns a 0.2% weight to each constituent – has risen 7.0% (as measured by the Invesco S&P 500 Equal Weight ETF, ticker: RSP). The so-called “Magnificent Seven” have come under particular pressure, falling 7.0% over the same period (Roundhill Magnificent Seven ETF, ticker: MAGS). By contrast, the small-cap Russell 2000 has advanced 6.1% since late December 2025.
In Europe, the Stoxx 600 has gained 6.9% since the start of the year, while the Swiss Leader Index has risen 3.3%. Performance in Switzerland was weighed down in particular by a 13% decline in UBS Group shares. By contrast, Nestlé has shown signs of a turnaround: the Vevey-based food group rose 14% in February alone. In Asia, the rally continued: the Shanghai Composite gained 4.9%, the Nikkei 225 16.9%, Taiwan’s Taiex 22.3% and South Korea’s Kospi 48.2%.
Global bond markets have seen a decline in long-term yields since the start of the year. The yield on 10-year US Treasuries fell to 3.96% at month-end (4.15% at end-2025), dropping below the 4% mark for the first time since October 2025. In Europe, 10-year sovereign yields also edged lower: Germany to 2.65% (2.86%), Switzerland to 0.20% (0.32%). Spain stood at 3.06% (3.29%), France at 3.22% (3.56%), Italy at 3.28% (3.51%) and Greece at 3.30% (3.48%). In the UK, yields declined from 4.47% to 4.24% in the first two months of the year. Even in Japan, 10-year government bond yields have eased recently, although at 2.12% they remain slightly above their end-2025 level of 2.07%.
In credit markets, strains have become visible in parts of private credit and private debt after a significant fund (Blue Owl Capital Corp II) permanently suspended redemptions. This also weighed on the performance of a listed credit vehicle managed by BlackRock. BlackRock TCP (ticker: TCPC) has fallen 25% since the start of the year. High-yield spreads have developed unevenly. In the US, they widened to 2.98% (2.81%), while in Europe they narrowed slightly to 2.64% (2.70%). In the first two months of the year, investment-grade bonds on both sides of the Atlantic modestly outperformed high yield.
Precious metals resumed their upward trend after a brief but sharp correction in late January and early February. By the end of February, gold was up 22% year-to-date and silver 32%. Gold mining equities (VanEck Gold Miners ETF, ticker: GDX) gained 35% in the first two months. Bitcoin – often referred to as “digital gold” – has fallen 25% since the start of the year and is trading nearly 50% below its October 2025 peak in US dollar terms. WTI crude oil prices have risen 17% year-to-date, while copper is up 7%.
In foreign exchange markets, the US dollar index DXY has slipped 0.7% since the beginning of the year. The dollar recovered modest ground against the euro in February. EUR/USD ended the month at 1.181 (1.185 at end-January; 1.175 at end-December 2025). The Swiss franc continued to appreciate. EUR/CHF stood at 0.908 at the end of February (0.931 at end-December 2025), while USD/CHF traded at 0.769 (0.793).
US economic growth in the 4th quarter of 2025 came in at 1.4%, below earlier expectations, reflecting the prolonged government shutdown. For the 1st quarter of 2026, growth is currently estimated at 3.0% (Atlanta Fed GDPNow, 27 February 2026). Annual US inflation fell to 2.4% in January (previously 2.7%). For February, headline inflation is expected at 2.41% and core inflation at 2.46% (Cleveland Fed Inflation Nowcasting, 27 February 2026).
Among the major central banks, only the Bank of England is expected to move in March, with a 0.25% rate cut anticipated at its 19 March meeting. In the US, markets expect two to three 0.25% cuts from mid-year onwards. Rate increases, by contrast, are anticipated in Japan, Australia and New Zealand.
In the near term, macroeconomic turbulence cannot be ruled out, including the possibility of stagflationary tendencies. However, the broader trajectory for the first half of 2026 is likely to remain favourable. We expect a Goldilocks scenario of solid growth combined with easing inflationary pressure. This could pave the way for looser monetary policy and support asset prices. A potential rise in unemployment as artificial intelligence becomes more widely adopted could provide additional scope for monetary easing.
AI has become the dominant narrative of this cycle. Yet markets do not trade narratives per se – they trade the timing of their realisation. The repricing in selected equity segments reflects not only confidence in technological progress, but assumptions about how quickly innovation will feed through into productivity, margins and cash flows. If that time horizon shifts, valuations shift with it. The key question is not whether AI will matter, but when its promises will translate into measurable economic results. In capital markets, expectations are expressed in time – and ultimately, time determines price…
March is seasonally regarded as a volatile month for equities and is often associated with the “Ides of March”. Given the military escalations in the Middle East, heightened volatility cannot be excluded in the short term. We remain cautiously optimistic and would selectively add to positions during pronounced pullbacks. Broad diversification remains essential – not only across regions and sectors, but also across style factors.
In this context, the so-called HALO effect – an acronym for heavy asset, low obsolescence –has gained traction. It refers to companies with substantial tangible assets and business models perceived to be less exposed to technological disruption. The focus should remain firmly on expected future cash flows, margins and earnings, rather than on past figures.
Falling inflation should lead to lower interest rates and support medium- and longer-duration bonds. Sovereign bonds also provide a degree of protection during periods of market stress, although we do not currently anticipate a pronounced economic downturn.
Within credit, we continue to favour investment-grade corporate bonds over high yield. We remain highly selective with regard to private credit and private debt. Exposure to emerging market bonds appears worth considering.
Gold remains a substantial portfolio allocation. Geopolitical tensions, structural central bank demand and lower interest rates provide a supportive backdrop. Additional commodity exposure is under review.
Trend-following funds (CTAs) have performed well in recent months. Given their low correlation to traditional asset classes, they remain a valuable component of portfolio construction.
In foreign exchange, we expect the Swiss franc to remain strong. We consider a return to negative rates by the Swiss National Bank unlikely at this stage. For EUR/USD, we anticipate a stronger dollar; a sustained break above $1.20 appears improbable. We believe the European Central Bank will be compelled to cut rates later this year, a move not currently priced in by markets. The Japanese yen may also reassert its role as a safe-haven currency and appreciate accordingly.