MONTHLY MARKET UPDATE
March 2026
Author: Jesmar Halliday, CFA
EQUITY MARKETS underwent a broad and synchronised decline, with most major indices ending the period
in negative territory. The sell-off was particularly acute across Asia and emerging markets, where investor sentiment weakened significantly. Indonesia recorded the largest drop at -13.96%, followed by Japan at -12.68% and India at -11.30%, illustrating a clear retreat from higher-growth and more volatile regions. European equities also experienced substantial losses, although these were somewhat less severe than in Asia. Germany declined by -10.30%, France by -8.81%, and the wider Eurozone by -8.34%, reflecting subdued economic conditions and weakening confidence. In the UK, the FTSE 250 fell by -10.53%, while the FTSE 100 declined by -6.17%, indicating that mid-cap companies bore the brunt of the downturn.
Across Europe, performance varied by market capitalisation, though no segment was immune. Smaller companies fell by -8.27%, lagging mid caps at -6.18% and broadly tracking large caps at -7.85%. This pattern suggests a generalised reduction in risk exposure rather than a clear shift into defensive large-cap stocks. In the United States, equity markets proved comparatively more resilient, although still negative overall. The S&P 500 declined by -4.98%, the NASDAQ by -4.68%, and the Dow Jones by -5.20%. Weakness was evenly distributed across market segments, with the Russell 2000 down -5.01% and the S&P MidCap 400 falling -5.39%, highlighting the absence of a clear safe haven within equities. Elsewhere, emerging market performance was mixed but generally subdued. Chinese equities declined by -5.53%, while Brazil showed relative resilience with a smaller drop of -0.70%. Eastern European markets, including Hungary at -4.07%, also faced downward pressure, reinforcing the view that global macro forces were the dominant drivers of performance.
BOND MARKETS endured a challenging period, with rising yields translating into widespread price declines. The most significant losses were concentrated in long-duration government bonds, particularly in the UK, where gilts with maturities beyond 15 years dropped by -7.31%. This underscores the heightened sensitivity of longer-dated assets to shifting expectations around interest rates. Across Europe, sovereign bonds declined across the maturity spectrum, though losses were less pronounced than in the UK. Bonds with maturities of 10–15 years fell by -4.12%, while those beyond 15 years declined by -4.09%. Intermediate maturities also weakened, with 7–10 year bonds down -3.30%, whereas shorter maturities held up better, with 1–3 year bonds declining by just -1.04%.
US Treasuries exhibited a similar trend, with longer maturities underperforming. Bonds in the 15+ year category fell by -4.00%, compared to declines of -2.33% for 7–10 year maturities and -1.88% for 5–7 year bonds. The short end of the curve proved more resilient, with 1–5 year Treasuries down only -0.75%, reinforcing the dominance of duration effects over credit concerns. Corporate credit markets also posted negative returns, though declines were more contained. Sterling investment grade bonds fell by -3.88%, eurodenominated credit by -2.27%, and US corporates by -1.98%. This suggests that spread widening was relatively modest, with losses primarily driven by movements in underlying government yields. Emerging market debt showed a more varied performance profile. Hard currency investment grade bonds declined by -2.73%, while local currency exposure proved more resilient. Chinese government bonds edged slightly higher by +0.09%, and Chinese corporate bonds gained +0.34%, highlighting regional divergence in monetary conditions. High yield markets also weakened, though less dramatically than government bonds. European high yield declined between -3.23% and -2.41%, while US high yield fell by -1.18%, indicating that while risk appetite softened, it did not collapse entirely.
Monetary authorities maintained a cautious and flexible stance throughout the period, carefully weighing inflation risks against growth considerations. The European Central Bank continued to signal patience,
acknowledging progress on inflation while highlighting persistent pressures in certain components. Markets began to anticipate a gradual shift towards easing later in the year, though policymakers avoided firm commitments. In the United States, the Federal Reserve struck a similarly balanced tone. While disinflation trends were recognised, officials emphasised that the path back to target inflation remains uncertain. Strong labour market conditions and resilient consumption supported a decision to hold rates steady, with policymakers keen to avoid premature easing. The Bank of Japan continued its gradual move away from ultra-accommodative policy, supported by improving domestic inflation and wage trends. Even incremental
changes in Japanese yields carried broader implications for global liquidity and capital allocation. Other central banks, including the Bank of England, largely adopted a similar wait-and-see approach, navigating persistent wage pressures and uneven growth dynamics. In contrast, some emerging market central banks began cautiously easing policy as inflation pressures subsided.
Geopolitical developments remained a central influence on markets. The conflict involving Iran intensified, with sustained military exchanges and disruptions to key energy infrastructure. The Strait of Hormuz emerged
as a critical pressure point, with supply disruptions pushing oil prices above $110 per barrel at times, amplifying inflation concerns and market volatility. Broader global dynamics also remained complex, with ongoing tensions between major powers, particularly in trade and technology. Economic conditions varied across regions, with the US showing resilience, Europe facing softer growth, and China displaying tentative signs of stabilisation amid policy support. Inflation trends continued to improve overall, though progress was uneven. Goods inflation eased, while services inflation remained more persistent, particularly in developed economies. This divergence reinforced central bank caution and contributed to continued volatility in interest rate expectations. March reflected a fragile equilibrium, where improving inflation dynamics were offset by geopolitical risks and growth uncertainties. While the global economy demonstrated resilience, it remained exposed to external shocks and policy missteps, particularly against the backdrop of heightened tensions in the Middle East.
Important Information:
This article was prepared by Jesmar Halliday, CFA, Portfolio Manager at MZ Investments and is intended solely for information purposes. The contents of this article should not be construed as investment, legal or tax advice, or as a recommendation to buy, sell, or hold any securities, investment strategy or market sector. The information contained in this article was obtained from sources believed to be reliable and has not been verified independently. MZ Investments, its directors and employees give no warranties of any kind, expressed or implied, with regard to the accuracy, correctness or completeness of this article and accepts no responsibility or liability for any loss or damages arising out of the use of all or any part of this article. MZ Investments is under no obligation to update or keep current the information contained therein. All investments involve risk. The value of investments may go down as well as up and investors may not get back the amount originally invested. Investors are urged to seek professional advice before making investment decisions.
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