The war in Iran (which commenced in late February when the US and Israel launched air strikes at Iran) dominated headlines, causing heightened volatility and pressure upon global equity markets. The ASX All Ordinaries Accumulation Index suffered its sharpest decline in nearly 4 years, falling - 7.3%. The ASX Small Ordinaries Accumulation Index was hit harder, declining -11.0%. From a sector perspective, Energy was easily the top performer (+19.2%), whilst Defensive sectors such as Utilities (+4.9%), Consumer Staples (+2.8%) Telecom (+2.5%) also fared relatively well. The hardest hit sectors included Gold (-23.4%) and Technology (-12.9%) as investor risk aversion increased.

US markets held up relatively well compared to their international counterparts, with the S&P 500 and NASDAQ falling -5.1% and -4.8% during the month, respectively. The outperformance vs the ASX and other major indices such as the Euro Stoxx 50 (-9.3%) and FTSE 100 (-6.7%) may reflect the US' greater energy resilience and the perceived status of the US dollar as a safe-haven asset.

Whilst the volatility in recent months is clearly difficult emotionally, we would emphasise the importance of taking a long-term view. We continue to focus on the underlying business performance of the companies in our portfolio, as opposed to stock price movements. The recent declines in a wide range of stocks has created some excellent investment opportunities which we expect to drive returns over the next few years.

In bond markets, the US 10-year bond yield recorded a sharp increase, rising +38 basis points (bp) to 4.32%, as similar to the US dollar, it was sought by investors as a safe-haven asset amidst the ongoing conflict in Iran. Its Australian counterpart also rose sharply, recording a +32 basis point increase to 4.97%. The Australian dollar fell -3.1% to US$0.69, implying a decline of 2.1 cents.

In this update, we present the quarterly State of Trend report for Q1, 2026. 

Our report covers the performance of trend following systems compared with traditional investments such as the S&P/ASX 200 Total Return index, and the Australia "60/40" portfolio. Trend following provides exposure to a diverse pool of underlying instruments, and implements trading strategies systematically and without emotional biases.

Trend following outperforms Australian traditional assets

In Q1 2026, traditional risk assets delivered negative returns, with the ASX200 and a 60/40 portfolio both finishing the quarter in the red amid escalating geopolitical risk and a sharp energy shock. Trend-following systems delivered strong positive returns, benefitting from equities and metals in the first two months of the quarter, and from the energy surge in March.

Key market movements in Q1 2026

• Markets navigated a quarter defined by escalating geopolitical tension, with the outbreak of the US-Iran conflict in March triggering an energy shock that sharply repriced inflation expectations and growth prospects

  • Equity markets fell broadly as risk-off sentiment intensified through the quarter

  • Fixed income markets also declined, with both Australian and US 10-year bonds finishing in the red as markets priced rate hikes in response to rising inflationary pressures

• Commodities provided the most dramatic moves this quarter

  • Energy markets surged on supply disruption fears following the effective closure of the Strait of Hormuz

  • Precious metals delivered positive returns despite a sharp sell-off in late March

• Trend-following strategies saw strong results early in Q1, driven by sustained momentum particularly in global equity markets. March brought whipsaw conditions as the energy shock triggered rapid reversals across several markets. Despite this, trend-following outperformed traditional assets for the quarter, demonstrating the benefits of a diversified rules-based approach

Featured chart - Crude Oil

• Crude Oil dominated the quarter, up 80% as the US-Iran conflict triggered fears of sustained supply disruption through the Strait of Hormuz. The rapid and sustained nature of the move created a strong trending environment across energy markets

• The scale of the energy shock raises the prospect of a broader shift in market regime. Trend following systems are designed to identify and adapt to such transitions, repositioning systematically as new trends emerge across asset classes

See the full report at our website.