That Was Q1 2026 – The Attack on Iran Is Changing the World!
The global financial markets got off to a very good start to the new year, but this ended abruptly with the attack on Iran. Since then, the cards have been reshuffled, and every investment sector and region is being put to the test. This is not just about oil and gas, but also about fertilisers and helium for hospitals and semiconductor manufacturers. Who would have thought that!
Shares in heavily overbought sectors such as gold and copper mining, semiconductor stocks, and Korean companies saw very sharp losses in March but are still in positive territory since the start of the year, in some cases even by double digits.
The biggest losers were technology shares, unprofitable growth companies, and shares from individual European countries, particularly Germany. India also joins this list, having had a very poor start to the year.
Added to this is the fact that both temporary and permanent rises in oil and gas prices require a reassessment of inflation forecasts: anyone seeing the images of long queues and steadily rising prices at petrol stations will conclude that inflation must be rising sharply. However, anyone looking at the so-called break-even inflation rate, which is derived from the valuation of inflation-indexed bonds, will note that medium-term inflation expectations have so far risen only marginally to just over 2% p.a.
The broad European market, as measured by the MSCI Europe, is hovering around the zero line. Latin America stands out with high double-digit gains. Nevertheless, the Iran conflict has thrown the financial markets off course and, above all, has resulted in losses and very few winners.
Global Equity Markets
Global equity markets were largely in the red at the end of the quarter. Both European and Asian markets saw double-digit corrections in March after clearly outperforming US equities in January and February. Broad-based global equity indices were down by just under 3% at the end of the quarter, which, given the daily market developments, can still be described as very moderate.
On the positive side, the MSCI World Value Factor, as well as broad-based dividend strategies, remained in positive territory at the end of the quarter. The same applies to equities from emerging markets, as well as shares in small and medium-sized companies in the US and Japan.
Interestingly, defence stocks have so far failed to benefit from the war in Iran and have, in many respects, fallen more sharply than the broader market. Clearly, valuations are currently so high that investors are more inclined to take profits, perhaps also to meet margin calls. In the long term, it can be stated that defence stocks have indeed outperformed the broader market as measured by the MSCI World Index. However, they are nowhere near matching the strong results of the technology sector over recent decades. As the valuation of the defence sector is currently well above that of the technology sector, my recommendation would be to avoid investing in defence stocks and instead turn attention back to the technology sector.
The only real winners of the Iran conflict at present are the shares of oil producers, which logically benefit from high oil prices. They have risen significantly and, in terms of valuation, are still attractive. It is therefore quite possible that this rally will continue.
However, anyone looking at the period since 2010 will note that oil company shares have performed considerably worse than the broader market. They have also lagged far behind the performance of companies investing in the optimisation of global power grids and modern energy infrastructure, as measured by the Nasdaq Clean Edge Energy Smart Grid Infrastructure Index (QGDN Index; investable via GRDU: LN). This raises the question of whether it is necessary to chase oil stocks now or simply stick with companies that are optimising the current energy infrastructure and building the networks of the future?!
Selected Return Investments
The traditional index components of the MSCI and FTSE Russell families have consistently recorded losses of between 3% and 5%, based on the broadest index aggregates (MSCI AC World IMI – FTSE All World). This is a good result given the current news.
Shares in technology and growth stocks, together with Indian equities, recorded double-digit losses and are now trading at attractive valuation levels again. The same applies to shares in private equity managers.
Shares in semiconductor manufacturers, precious metals, and copper saw a sharp correction at the end of March but were still clearly in positive territory at the end of the quarter.
For the first time since Das Family Office Pte. Ltd. was founded, the broad-based factor indices from Dimensional Fund Advisors clearly outperformed the MSCI AC World IMI and the FTSE Russell All World indices. With a gain of 0.63% at the end of the quarter, they are performing almost 5% better, which we are delighted about. Only the MSCI World Value Factor Index achieved an even better result at 1.87%.
The MSCI World Quality Factor outperformed the MSCI AC World IMI Index in the first quarter. The STOXX Global Multifactor Index matched the performance of the MSCI AC World IMI, while the MSCI World Momentum underperformed, recording a loss of 6.06%. All value indices (Global, USA, Europe, and Emerging Markets) significantly outperformed the MSCI AC World IMI. The company size factor, based on the Vanguard World Small Cap Index Fund (R4-I), has gained around one percent since the start of the year, demonstrating that including small-cap companies in a portfolio makes good sense.
Our stock pickers were particularly successful in the technology and REIT sectors (CT Technology, Cohen & Steers). They also achieved very good results in Asia (JPM Asia, BNP Japan Smaller Companies). Among the globally diversified active managers, CT Global Focus and Wellington Global Quality Growth delivered good results. All other managers underperformed their benchmarks in the first quarter. The portfolios of the growth managers at Baillie Gifford and Morgan Stanley suffered the most. This is primarily due to rising interest rates and appears to be following a similar pattern to 2022.
Development of Selected Stock Markets – Q1 2026
- O11-A | CT Lux Global Focus
- Portfolio 6 | Dimensional World Equity Fund
- R45-A | CT Global Technology
- O18-F | iShares Edge MSCI World Value Factor ETF
- O1-I | SPDR MSCI All Country World ETF
Global Bond Markets
Bonds have suffered losses across all maturity segments, with very few exceptions such as inflation-protected securities (TIPS) and emerging market high-yield bonds. Only money market instruments remain in positive territory, as expected.
The risk of incurring price losses on bonds stems from what is known as duration. The longer the duration, the more a bond reacts to changes in interest rates. When interest rates rise, a high duration leads to greater losses; when interest rates fall, it leads to greater gains. We list duration as a point of information alongside our security modules on pages 23 to 31 of this report.
However, anyone looking at these pages will note that European government bonds with the highest duration are still in positive territory since the start of the year, whereas almost all other modules are showing negative returns.
This is unexpected but can be explained by the fact that long-dated European bonds were very attractively valued at the start of the year. Even now, with a current yield of just under 4% p.a., they still offer a significant premium over the medium-term expected inflation rate of 2.10%.
Market sentiment at the start of the year was probably too negative in this regard. Furthermore, very long-dated bonds often serve as a form of insurance during periods of crisis.
Selected Safety Investments
The traditional index components have performed well in money market investments (FairHorizon Purple), achieving positive returns of between 0.10% and 0.80% p.a. For bonds with normal duration (7 years), there were consistent losses of between 0% and 1% due to ongoing inflation concerns, which are accompanied by slightly rising interest rates. Dimensional Fund Advisors’ systematically managed bond components also recorded losses but outperformed traditional bond index building blocks.
For the first time in many quarters, several of our actively managed bond portfolios failed to outperform their index peers and recorded slightly higher losses.
In special situations such as high-yield bonds, subordinated debt, or emerging market bonds, there were also losses of just under 2%, except for Aberdeen Frontier Bonds (Y7-A), which ended the quarter up almost 1%.
This result is not surprising, as specialty bond segments generally carry higher risk, which is why we classify them as green and yellow in the FairHorizons to ensure that they are held for a sufficiently long period in an investor’s portfolio.
Development Safety Investments – 2025
- B1-I | Vanguard Global Bond Index Fund
- P5-I | iShares USD Floating Rate Bond ETF
- B15-A | PIMCO Income Fund
- Y7-A | abrdn SICAV I – Frontier Markets Bond Fund
Focus Global Private Markets
As far as private equity is concerned, the bad news for private credit managers shows no sign of abating. Many investors want their money back but can only recover it gradually.
In my view, many of these strategies are not suitable for retail and private banking investors, as they are not emotionally prepared for the demands of this asset class. At the time of purchase, the prospectuses do indeed point out that private markets are illiquid and that investors must commit to long investment horizons and accept the risk of gating.
However, as soon as clouds appear on the horizon, strong feelings of anxiety arise. Investors then want their money back early, which in turn forces managers to sell good investments at the wrong time and at unattractive prices. This can then lead to a downward spiral reminiscent of banking crises.
Anyone who cannot or does not wish to commit for the medium to long term should steer clear of such investments.
Those seeking high coupons will also find opportunities in more liquid markets, even if these quickly reveal the true volatility of risky bonds – caveat emptor!
We are generally open to quality private market portfolios at the right price and with modest management fees, but in our FairHorizons concept we have marked private credit as yellow, meaning that such investments should be held for at least 7 to 10 years. We have marked private equity and venture capital as red, implying an investment horizon of at least 15 years. In this way, we aim to achieve a meaningful classification of the opportunities and risks associated with private market investments.
Because of the current crisis of confidence, the shares of private equity managers suffered significantly in the first quarter. They could well become interesting once the situation stabilises, as their valuations appear attractive.
Focus Global Commodity Markets & Bitcoin
Just as oil company shares had a strong March, commodity indices and commodity funds also emerged as winners. This was primarily because energy futures account for around 65% of all major commodity indices.
Agricultural commodities also had a strong March, but in our view, they are not suitable for long-term investment.
In contrast, precious metals had a very weak end to Q1, which is likely to be primarily due to profit-taking. During periods of severe market turmoil, investors using leverage often face margin calls, following which investments showing high profits are typically sold. This was certainly the case with gold. However, at USD 4,000 per ounce, long-term investors appear to be buying again.
Following the significant losses at the start of the year, Bitcoin appears to be stabilising between USD 60,000 and 70,000. The direction going forward remains unclear. Technical analysts see strong support at USD 60,000. However, the downward trend is still intact. Our strategist Michael, who advocated buying Bitcoin at USD 1,000 in 2017, is currently more inclined to sell into strength.
Focus Global Currencies
On the currency front, we can observe that the US dollar has stabilised sustainably. At present, it is even benefiting from the military conflicts in Iran. Nevertheless, it should not be forgotten that the US government tends to prefer a weaker dollar and that the currency appears expensive given America’s high level of debt and based on purchasing power parity. Diversification into more stable currencies such as CHF, SGD, AUD, and NOK may therefore be advisable.
If clients are interested in foreign currency financing, we currently favour CHF, SGD, and HKD over the Japanese yen for Lombard loans.
DXY Index – Q1 2026
Development of Our Investment Styles
We generally advocate three investment strategies or philosophies that we can confidently assume are highly likely to lead to success in the long term. They are well established and have delivered good results for investors who have consistently followed them, even if there are significant short-term fluctuations and return dispersions.
1) Traditional Index Investing
This strategy works very well, and there is no reason to question it. However, on the equity side, the strategy also means that many indices in the MSCI and FTSE Russell families are currently heavily dominated by US equities. This has worked well in the recent past but has led to some disappointment since the start of 2025. Indices that are less heavily invested in US equities (World ex USA; Europe, Asia, and Emerging Markets) have performed significantly better in 2025, as well as over the course of the year to date. It is therefore important to assess the extent to which one’s own portfolio might also be, and should be, overweight in the US.
When it comes to bond indices, the fact remains that traditional indices are inevitably more heavily invested in bonds from higher-debt issuers than in those from less indebted issuers. For this reason, investors keen on ETFs should take the trouble to compare bond indices with systematically designed indices (e.g. Dimensional) or well-managed active bond portfolios purchased at institutional pricing.
2) Factor-Based or Scientific Investing
Since the start of the year, the value factor has again achieved strong outperformance in Q1, after having done extremely well in 2025. Shares in small companies (size factor) have had a good start to the year in both Japan and the US, though less so in Europe. The quality factor has improved so far this year following a poor 2025 and, despite losses, is outperforming its benchmark. We are very pleased about this, as we generally hold the quality factor in high regard and have seen it successfully implemented in many actively managed portfolios. The momentum factor lagged somewhat in the first quarter of 2026 but now appears attractively priced. We have not seen that in many years.
As far as scientific investing in bonds is concerned, one should perhaps speak of systematic investing rather than factor investing. Generally, fewer bonds are purchased than is the case with the traditional indices of the FTSE Russell and Bloomberg families. In this way, it is possible to reduce the risk associated with individual issuers and thus achieve a better overall result without deviating significantly from the character of the bond benchmarks.
Systematically constructed bond portfolios can therefore generally perform slightly better than traditional bond indices. This was also the case in the first quarter of 2026.
3) Investing in Just a Small Number of Securities
In the first quarter, several of our preferred bond managers failed to outperform their benchmark indices for the first time in a long while and are now slightly behind. The same applies to our active equity managers, who, with a few exceptions, lagged their benchmarks at the end of the quarter.
I would particularly like to highlight Paul Wick of Threadneedle/Seligmann once again, who has been ahead by close to 4% since the start of the year, whereas the Nasdaq 100 has recorded a loss of more than 8% and the MSCI World Technology a loss of about 11%. Talk about high-quality stock picking!
As there appears to be a rotation away from the Nasdaq 100 and the Magnificent 7 towards other technology segments, I consider Paul’s fund to be the best way to participate in this rotation whilst remaining invested in the technology sector.
Development of Model Portfolios
We use the Dimensional World Allocation Portfolios as our standard model portfolios, as they provide a highly representative picture of global financial markets, are very cost-effective, and cover all our FairHorizons across all relevant currencies (USD, EUR, GBP, and SGD).
All six building blocks had an exceptionally good first quarter, which was primarily due to the strong performance of the Dimensional equity strategy. It is currently benefiting significantly from the strong performance of small-cap companies, as well as the lower weighting of large-cap technology stocks.
Due to their very low costs, we are pleased to showcase these strategies to our community members who are dissatisfied with the asset management services provided by major banks.
The current performance of the Dimensional portfolios is very encouraging and reinforces the view that it can be worthwhile to stick with the same strategy over the long term. I would even go so far as to suggest that these portfolios outperform more than 90% of all discretionary portfolio management offerings of private banks. This is because the low costs and systematic approach cannot be replicated by private banks.
For investors whose reference currency is EUR or GBP, Vanguard also offers a range of investable model portfolios (Vanguard LifeStrategy), which have also performed very well and present attractive alternatives to private bank portfolio management services.
Furthermore, for EUR investors, there are a few interesting options within the FairHorizons Yellow (7–10 years) and Orange (10–15 years) horizons that are also suitable for long-term investment (e.g. ARERO, Global Portfolio One).
Outlook for the Coming Months
The war in Iran has clearly disrupted the positive stock market performance seen since the start of the year and is forcing us to review our portfolios, particularly regarding the possibility of a resurgence in inflation. This is primarily because inflation dictates the decisions of global central banks. The major central banks have generally found themselves in an environment of stable to slightly falling interest rates.
However, should the current rise in oil and gas prices lead to a permanent increase in inflation rates, it is possible that central banks will either refrain from cutting their key interest rates further or even raise them slightly. Such a scenario is likely not yet priced into financial markets and could lead to further price adjustments, even though specific market segments have already undergone a significant correction.
However, when we look at the current valuations of high-return and safety components in our high-rise charts (pages 11–14), we are pleased to note that the current yields of the safety components, regardless of the investment horizon (FairHorizons purple to green), are all significantly above the expected medium-term inflation rate of around 2% p.a. Even the yields on money market investments are above current inflation rates and offer protection of purchasing power, even if we see a sharp rise in oil and gas prices.
Regarding the high-return components we select for longer-term investment horizons (FairHorizons yellow to red), we always communicate a minimum target return of 6% p.a. or a projected long-term return of between 6% and 8% p.a. This corresponds to price-to-earnings ratios (P/E ratios) of between 14 and 17.
Having advised caution regarding investments in the MSCI World, the Nasdaq 100, and the S&P 500 at the end of February, we now believe that these components are again worth considering for long-term investments, as the risk premiums here are approaching the 6% mark again or, in the case of the MSCI World, exceeding it.
The same applies to the Indian equity market, which is showing attractive valuations following its sharp correction. Whilst the market hasn’t fully stabilised, long-term investors should not hesitate to build positions.
Equities in Europe, Asia, and Emerging Markets are trading at risk premiums (i.e. target yields) of between 7% and 8% p.a., which is why we are comfortably on the buy side here, even if valuations are no longer as favourable as they were at the start of 2025. The recent corrections in Taiwan Semiconductor and Samsung Electronics are very welcome to us, as both stocks are heavily represented in both Asian and Emerging Markets portfolios.
The valuations of our underperformers in 2025, namely REITs, quality factor index ETFs and managers, the healthcare sector, and listed private equity firms, remain attractive to very attractive. This therefore invites us to consider these investments, which are promising in the long term but disappointing in the short term.
Regarding the shares of private equity firms, we are monitoring the news very closely but are holding back on purchases for the time being, even though valuations appear very attractive at first glance.
Shares in precious metal and copper producers have become attractive again following the recent correction and can serve as a portfolio addition. Commodity indices also do not look too expensive despite their strong performance in March and can be added to portfolios. However, we would not wish to exceed a portfolio allocation of 10–15% in commodities.
In the long term, investments in metals and precious metals have outperformed commodities that must be acquired via futures, which entails significant (roll) costs and reduces returns. These include, above all, energy and agricultural commodities, which account for about 60–70% of commodity indices, explaining our preference for metals and precious metals or shares in metal and precious metal producers.
Following the significant correction in many technology and growth stocks, we would again recommend buying here. This applies to broadly diversified index investments as well as the actively managed portfolios of Baillie Gifford, Morgan Stanley, and Threadneedle. As mentioned on several occasions, I consider the CT Global Technology Fund, managed by Paul Wick, to be a very good solution at this moment.
Investors considering energy and defence stocks might be better off focusing on energy infrastructure (First Trust Nasdaq Energy Infrastructure – Component R73-I) and traditional technology components (CT Global Tech (R45-A), MSCI World Tech (R29-I)).
As for our three preferred investment styles, we can only emphasise that all three strategies perform very well in the long term, even if they may prove disappointing in the short term.
Investors should therefore definitely stick to their chosen investment styles and not change them out of disappointment. For example, anyone who had switched from the Dimensional World Equity Portfolio to the MSCI World would now be missing out on 5 percentage points.
In this context, I am also thinking of the poor performance of the quality factor in 2025, which appears to be reversing in 2026, as risk premiums have now risen significantly above 5.5% p.a. and the dollar weakness of the previous year should no longer have such a strong impact.
The momentum factor also looks interesting, as it performs very well in the long term and current valuations appear very favourable.
Anyone looking to simply track current trends with fresh capital should consider value strategies. The positive trend of recent years appears to be continuing, and valuations remain favourable.
As a rule of thumb, we recommend indexing for money market investments, active management for most bond strategies, and a mix of indexing and stock picking for equity investments. That is what we do ourselves, and we look forward to seeing the results.
For “fresh money”, we recommend our proven concept of FairHorizons, which we have developed based on established asset allocation principles. It offers a simple way of creating portfolios that can beat inflation and earn attractive risk premiums.
Please also look at our standard investment portfolio ideas on pages 18–22, which follow the principles of investment legends like Jack Bogle, Eugene Fama/Kenneth French, and Warren Buffett/Charlie Munger. Whilst all of them represent different investment philosophies, they are all very effective and successful in the long term.
If you are worried whether your portfolio is well equipped for the significant changes in today’s world, just get in touch with us. We’ll be more than happy to check this for you.
Otherwise, I would be delighted if you could tell your friends and family about Das Family Office so that they can also become part of our community.
With best wishes for a calmer and more peaceful second quarter!
