Performance update

At the beginning of April, markets bounced on positive news of a ceasefire in the Middle East. Risk‑on sentiment persisted through much of the month, despite continued oil price volatility and high tensions in the Strait of Hormuz. Equities staged a powerful rally, led by AI‑related stocks: over an 11‑day period, the S&P 500 gained more than 10% and reached new all‑time highs. The global equity index (including emerging markets) surged 8.4% in April (returns in euro). Fixed income returns were marginally positive over the month, with concerns lingering over inflation and the path of interest rates. Portfolio returns ranged from 1% to 6% depending on risk profile.

Year to date, returns ranged from 0.4% in Cautious portfolios to 4.8% in Equity-oriented portfolios. GPS fund returns were marginally ahead, reflecting the fact that some less liquid instruments held in core portfolios had yet to fully capture the April rebound in month‑end pricing.

Figure 1 highlights the sharp sell-off and equally notable recovery in the GPS funds over the past two months.

Figure 1: Year to date portfolio performance

Portfolio commentary

Looking back at monthly global equity returns since the turn of the century; 31 of the 316 months recorded gains of more than +5%, while 37 months saw declines of greater than −5%. Figure 2 ranks these outlier months side by side (returns are based on the MSCI All Country world Index in euro).

As expected, the most negative months are concentrated around periods of major stress, including the dot‑com bust, the Global Financial Crisis, and the covid pandemic. Notably, however, the strongest months for equities also tend to occur in the aftermath of these episodes.

In short, volatility and extreme downside/upside moves can cluster, meaning that reacting to events based on fear or greed can be detrimental to long‑term returns. March and April 2026 returns were large enough in an historical context to feature on the opposite sides of this chart. A fresh example on the importance of avoiding over‑reactions to negative shocks.

Figure 2: Monthly returns for global equities exceeding +/-5% since Jan 2000 (in euro)

As Donough noted above, technology stocks had a standout month. The global tech sector rose by +20% in USD terms, driven largely by strong gains in semiconductor companies which advanced +30%. One active manager held in portfolios with an overweight to technology is the SGA Global Equity Growth fund. The fund’s monthly outperformance was underpinned by significant gains in semiconductor holdings, including ARM (+39%), Broadcom (+35%), and Nvidia (+14%). SGA also holds a sizeable overweight to another growth stock, Amazon, which rose +27% on strong cloud computing growth that helped earnings to beat expectations (figures in USD).

With U.S. large‑cap growth stocks leading the rally, other areas of the portfolio lagged over the month. Some of the global active managers, along with tactical positions in European equities and the S&P 500 equal‑weight index, underperformed. Offsetting this, tactical overweight positions in emerging market equities and Asia high yield bonds, as well as regional equity managers Acadian European and Wellington Emerging Markets, again delivered strong relative performance.

Portfolio changes

We made a number of tactical adjustments to portfolio positioning during April.

We reduced the allocation to European equities from 2% to 1% (moderate-risk portfolios), reallocating the proceeds to emerging market equities, which increased from 1% to 2%. The call to overweight Europe versus global equities was initiated in June 2024 and then increased in January 2025. The call outperformed, adding to portfolio returns over the period. European equity returns were supported by German fiscal support, an interest rate cutting cycle from the ECB and increased investor demand for diversification away from U.S. markets. While we have reduced the allocation, we are maintaining a tactical exposure to Europe, as the core elements of the original investment thesis remain intact; most notably attractive valuations and solid earnings expectations, albeit to a lesser extent than previously.

The second change we made was to close the currency‑hedged equities position. This trade was implemented in two stages following the ‘Liberation Day’ market sell‑off in April 2025, when trade policy announcements by President Trump triggered a sharp bout of U.S. dollar weakness. The position was effective in shielding portfolios, as the dollar weakened against the euro from the 1.09–1.12 range to nearly 1.18 by the time we partially reduced the exposure in September. More recently, U.S. dollar strength has reversed following the announcement of a fragile ceasefire in Iran, with the euro once again trading back toward 1.18. Although our medium‑term bias remains for further euro appreciation, the catalysts for renewed dollar weakness are now less convincing. Moreover, portfolios already carry a meaningful structural underweight to the U.S. dollar through existing positions and manager exposures, making this an appropriate juncture to fully exit the trade.

If you have any questions on the portfolio changes, please contact your Davy Private Client Adviser.

Figure 3: Tactical asset allocation for moderate growth as at April 2026