2 March 2026: Weekly Update – Strong Market Start and Rising Gulf Tensions

However, recent events in the Gulf are a reminder of how quickly the backdrop can change. Over the weekend, US and Israeli strikes on Iran have sent oil prices sharply higher and prompted a “risk‑off” reaction, with equity markets weaker at the start of the new week and traditional safe havens such as government bonds and gold finding support. So far, markets are reacting in a way that is typical of a sudden geopolitical shock focused on energy supply and the Strait of Hormuz. This adds a new source of volatility but does not necessarily undo the positive progress made in portfolios over the first two months of the year.

Beneath the headline index gains there has also been a notable rotation within equity markets. Areas linked to software-as-a-service within the artificial intelligence theme have come under pressure as investors reassess business models in light of potential AI disruption. That has weighed on some dedicated AI and software exposures globally. Notably, however, the Polar Capital Artificial Intelligence Fund held across the T. Bailey funds of funds portfolios has continued to add value by rotating towards clearer AI beneficiaries and avoiding the more vulnerable parts of the SaaS universe.

Not all thematic positions have been rewarded in the short term. The First Trust NASDAQ Cybersecurity UCITS ETF (held in the T. Bailey Global Thematic Equity Fund) has detracted as the wider cybersecurity and SaaS complex has been caught up in the de‑rating of richly valued growth stocks, despite the long‑term structural need for cyber spending remaining intact. Chrysalis Investments has also weighed on returns. Alongside the broader de‑rating of later‑stage growth and private‑market assets, the company has been dealing with a possible change of mandate towards a managed wind‑down and a public dispute between the board and its investment adviser over future strategy and governance. These internal developments have added an extra layer of uncertainty and contributed to share price weakness, even though the underlying portfolio is being managed with a view to realising value over time rather than pursuing new investments. We continue to see a role for these more idiosyncratic growth exposures within a diversified framework, but they are sized appropriately given their higher volatility and sensitivity to swings in sentiment.

Overall, what we take from the opening months of 2026 is a picture of: strong market returns, with leadership emanating from Asia and emerging markets; mixed fortunes within AI and related themes through disruption to established business models; and an abrupt geopolitical shock in the Gulf. This underlines the importance of sensible diversification rather than trying to back a single winner or headline. The positioning across the T. Bailey funds, with a bias towards regions enjoying improving sentiment and careful selection within powerful long‑term themes such as AI and technology more broadly, has been rewarded so far this year, even as some individual holdings have detracted. As ever, we expect leadership to continue rotating beneath the surface. The portfolios remain actively managed to balance participation in structural growth areas with prudent risk control, including a tilt towards more valuation‑aware opportunities that are supported by a favourable capital-cycle backdrop, in what is clearly still a volatile and event‑driven environment.