Webinar: Market update and economic outlook – April 2026
In our latest client webinar, Caspar Rock and Katarina Cohrs discuss the implications of the Iran conflict for inflation and economic growth and explain how we’ve adjusted portfolios.
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This webinar was recorded on 22nd April. Views expressed in the video are based on developments as of that date.
Our expectation of strong global growth this year remains intact, but it is being challenged by the conflict in the Middle East. The closure of the Strait of Hormuz, and resulting higher energy prices, complicate the balance between growth and inflation in the global economy. As a result, we have slightly reduced risk in client portfolios.
For Caspar Rock, Chief Investment Officer, the priority in this fast-moving environment is not prediction, but adaptability. “We're employed to do two things,” he noted. “One is to try and predict what is going to happen and the other is to adapt to changes in the market or our core assumptions.”
“The really big question is not so much the price of oil,” Caspar says, “but the supply of oil and changes in supply.” A prolonged interruption through the Strait of Hormuz would have far more significant implications than short‑term price spikes alone.
Even so, he cautions against overreacting to unsettling headlines. “Investing is not a sprint; it’s a marathon,” he notes, pointing out that sharp intra‑year drawdowns are common, while negative calendar year returns are comparatively rare. “Despite the volatility we’ve seen, markets are still up year to date.”
Some of this year's moves have also created opportunities. We increased our exposure to gold, which sold off aggressively during the initial phase of the conflict. “At times, it still pays to be brave,” Caspar explains.
Looking through the lens of growth and inflation
Katarina Cohrs, Investment Strategy Director, explained how thinking about growth and inflation helps chart a path through such an uncertain environment.
At the start of the year, markets were benefiting from a favourable mix of accelerating growth and decelerating inflation – an environment supportive of both equities and bonds. The surge in energy prices has disrupted that balance. “It’s incorrect to talk about stagflation today,” she says, “but that is the direction of travel, with economic activity decelerating and inflation accelerating.”
That shift has important consequences for asset allocation. We cut our allocation to equities from overweight to neutral, not because the cycle is ending, but because risks have become more asymmetric. “We’re not underweight equities,” Katarina stresses. “That’s because we don’t see the cycle ending any time soon.” Earnings growth remains positive, supported by structural drivers such as ongoing investment in AI, even if higher energy prices do start to weigh on consumption.
Bonds, by contrast, remain underweight. “Bonds are really not the asset of choice in a structurally higher inflation environment,” Katarina suggests. Instead, we’re increasingly looking to alternatives for diversification. Gold, commodities and hedge fund strategies all have a role to play.
Looking ahead
Since the start of the conflict, equity markets have recovered their earlier losses, reflecting optimism that disruption can be contained and earnings momentum remains intact. Energy prices, however, remain high, and that tension - resilient markets alongside elevated oil – is now central to the outlook.
For Caspar, the most important question is whether higher energy prices begin to undermine growth rather than simply lift inflation. As long as growth proves resilient, markets may continue to look through geopolitical stress. If the balance shifts, however, markets may become more challenging.
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This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.
This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.
All data contained within this document is sourced from Cazenove Capital unless otherwise stated.
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