Written by Cormac Nevin
If the previous week was about markets reacting to rising tensions in the Middle East, last week was about investors becoming a bit more cautious. Both shares and bonds fell at the same time, which is never particularly comfortable. Global shares dropped around -1.4% over the week, with the US market falling more sharply at around -2.0%. At the same time, bond markets also declined, with most major indices down between -0.2% and -0.4%. When both of these fall together, it can feel like there is nowhere to hide. In reality, this tends to happen when markets are adjusting their expectations for interest rates.
That is exactly what we are seeing now. Earlier this year, investors expected central banks to start cutting interest rates in 2026. That now looks less certain. Instead, markets are beginning to price in the idea that interest rates may stay higher for longer.
This matters because higher interest rates affect how assets are valued. In simple terms, when rates are higher, future profits are worth a bit less today. This has a bigger impact on certain types of companies, particularly fast-growing technology firms.
This helps explain why the US market struggled more than others. The Nasdaq-100 Index, which tracks the largest US technology and growth companies, , fell around -3.1% over the week, while more value-focused markets, such as the UK, held up better, with the FTSE All Share actually rising +0.4%, aided by the performance of large commodity related companies listed in the UK. At the same time, ongoing tensions in the Middle East are still influencing markets, mainly through energy prices. While prices did not surge further last week, they remained elevated and continued to raise concerns about inflation.
Higher energy prices feed into the cost of many everyday things, from transport to food. Because of this, central banks are being cautious. They are less willing to cut interest rates quickly if there is a risk that inflation could rise again. Bond markets have reflected this shift. Yields have moved higher again, which means bond prices have fallen. This is why bonds have not provided their usual protection over the past few weeks.
Despite this, not everything has been negative. Commodities have continued to perform well this year, with the Bloomberg Commodity Index still up strongly year-to-date, even after a small move last week. Global Listed Infrastructure also delivered positive returns over the week, showing that some parts of the market are still holding up. This is an important point. Different assets behave differently at different times. When one part of a portfolio is struggling, another can help balance things out.
Looking at the bigger picture, at this point, this does not appear to be a long-term crisis. Instead, markets are adjusting to a slightly different environment. Inflation is still relatively contained, with longer-term expectations around 2.4% in the US. Economic data suggests growth is slowing a little, but not sharply. Companies are still expected to grow their earnings over time. In other words, the world has not fundamentally changed. What has changed is how quickly markets expect things to improve.
Periods like this are a normal part of investing. Markets rarely move in straight lines, and short-term setbacks are common, particularly when there is uncertainty around interest rates and geopolitics. For long-term investors, the key point is that portfolios are designed with this in mind. They are built to handle different environments, including ones where both shares and bonds come under pressure at the same time.
While weeks like this can feel uncomfortable, they are not unusual, and they do not tend to last forever. If anything, they serve as a reminder that staying diversified and focused on the long term remains the most reliable approach.
All performance figures are stated in Sterling terms, unless otherwise specified.
Any opinions stated are honestly held but are not guaranteed and should not be relied upon.
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All the data contained in the communication is believed to be reliable but may be inaccurate or incomplete. Unless otherwise specified all information is produced as of 30th March 2026
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