Q1’26 Financial and capital market updates

Global overview

Valuation trend

Through Q1 2026, global valuations have shown relative resilience but increased volatility, as early expectations of monetary easing have been offset by renewed inflation concerns.

The escalation of the Iran–Israel–U.S. conflict has contributed to rising energy prices, placing upward pressure on discount rates and weighing on equity multiples.

While earnings remain supportive in select sectors such as energy and large-cap technology, broader market valuations have become more sensitive to macro uncertainty.

Regulatory change

Regulatory focus in 2026 remains centered on valuation transparency, liquidity, and consistency in pricing frameworks.

The European Securities and Markets Authority (ESMA) continue to refine guidance on liquidity stress testing and valuation governance, particularly in less liquid asset classes.

In parallel, both the ECB and the European Banking Authority (EBA) have emphasised strengthened valuation controls in response to increased market volatility and pricing uncertainty.

Market movement

European equities have largely traded sideways, with intermittent volatility driven by geopolitical developments and energy price fluctuations. U.S. markets have remained relatively more resilient, supported by large-cap technology, though market breadth has narrowed.

Investor positioning has shifted more defensively in recent weeks, with increased allocation toward energy, infrastructure, and quality balance sheet names, reflected a more cautious risk environment.

Economic indicator

Macroeconomic conditions in early 2026 reflect a shift from disinflation toward renewed price pressure, driven in part by external shocks.

The Iran–Israel–U.S. conflict has disrupted energy markets, contributing to higher inflation across major economies. While growth remains positive, it has become more uneven, with downside risks increasing.

Central banks, including the ECB and Fed, have adopted a more cautious stance, with bond yields rising modestly as markets adjust to a prolonged high-rate environment.