16 March 2026
Another week of supply shocks in investment markets. Commodity prices have surged – Brent oil is up around 50% versus February, while European gas prices have doubled. How should investors position now?
First, big oil shocks matter. Historically, large spikes pre-empt recessions. That is not the base case today, but the risks warrant some tactical de-risking in portfolios. Oil prices should fall back through 2026, even as some geopolitical risk premium lingers. This temporary shock is disruptive but not decisive for growth. It means more volatility in markets, and a short interruption to “broadening out”.
Second, this time is different versus previous risk-off episodes. The dollar is up – but to a more limited extent than we would usually expect. Meanwhile, global bonds are down – investors reckon the Fed will back away from cuts, and the ECB might even hike in 2026. And EM stocks and bonds have been much more resilient than usual. That’s impressive and reflects the new reality of improved macro and policy fundamentals.
Third, the regime has changed. This is the fifth supply shock to the macro system in the last five years! Today’s environment of rolling geopolitical events and supply disruptions points to an altered economic regime. One where inflation is more volatile and market correlations changed. This new world requires careful navigation – investors will need to “diversify the diversifiers”, and be more active and selective with growth exposures in portfolios.
Today’s global oil disruptions echo the energy shocks of the 1970s. The 1973 Yom Kippur war and the resulting first OPEC oil embargo stand out as a major event, triggering a two-year bear market. But the modern backdrop is fundamentally different. The US is now energy independent, global economies are less oil intensive, and strategic reserves are robust.
As such, more recent shocks have had a limited impact on markets. The most serious was Russia’s invasion of Ukraine in 2022. That conflict has some similarities with the current crisis, including the size of the oil spike. But even so, the S&P 500 drawdown was limited to around 13%, and the losses were recouped in just 120 trading days.
And crucially, the post-1990s era of inflation targeting and independent central banks means inflation expectations are now anchored leaving more wriggle room for central banks to look through price shocks. With macro conditions much more fragile than they were in 2022, a surge in policy rates like we saw then is very unlikely.
The key lesson? Geopolitical shocks often trigger sharp, short-term volatility, but recoveries are typically swift. Staying invested and tactically diversified remains the most effective strategy to weather the storm.
The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. Past performance does not predict future returns. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management, Bloomberg, Macrobond. Data as at 7.30am UK time 13 March 2026.
While bonds have struggled under the oil price shock, emerging market (EM) debt has shown remarkable resilience – not only compared to the 2022 energy crisis, but also relative to developed market counterparts. This pattern has been evident across several episodes of market stress over the past two years. This highlights the impact of structural improvements in many EM economies. For example, fiscal dynamics in several EM countries are improving just as Western government finances face heightened scrutiny. This explains why the latest sell-off hit the UK and Italian debt the hardest – both markets being pressured by stretched finances and stagnant growth. What’s more, rising local ownership has provided some shield from global market volatility, and attractive valuations provide an additional cushion; real yields in many EM markets remain significantly higher than those in DM. |
With global portfolios still heavily skewed towards US assets, the scope for further inflows into EM local-currency bonds remains substantial.
Last year’s rally in emerging market stocks was mainly driven by a re-rating, helped by the tailwinds of a softer US dollar and worries over US market concentration. So, coming into 2026, further EM momentum really depended on firms delivering solid profits growth. The good news is that despite increasing geopolitical risks, analyst expectations on EM have been rising, particularly in Asia, where profits growth forecasts have jumped from 20% to more than 30% in recent months. A lot of this fresh optimism has come from exposure to AI-related sectors such as semiconductors and hardware, boosting expectations for South Korea and Taiwan. |
Of course, the conflict in the Middle East means trends in the US dollar will need to be monitored closely, while big oil importers could see their forecasts pared back. However, Latin America could benefit from higher commodity prices. And the AI megatrend sustains despite recent macro stress. Overall, the likelihood is that profits still broaden out in 2026. This, combined with still low valuations, supports an expectation of positive EM market performance this year.
With geopolitics causing turmoil in markets – and stocks and bonds both under pressure – the traditional 60/40 portfolio model continues to look vulnerable. For investors seeking better protection than bonds have recently provided, hedge funds could be an alternative. In the period following the global financial crisis, bonds tended to be an effective hedge for portfolios, leaving hedge funds on the sidelines. But today’s environment looks more like the 1990s, a period when hedge fund returns were strong. Inflation was stickier, the world was more fragmented, central banks’ role a bit more limited, and fiscal policy more active. These strategies can take a flexible approach, benefiting from short-term opportunities in both rising and falling markets – ideal amid volatile conditions. |
In a world where macro and policy uncertainty are elevated, and valuations in parts of the market are still high, hedging against bad outcomes remains important. And with traditional safety assets proving unreliable, hedge funds could be a way to “diversify the diversifiers”.
Past performance does not predict future returns. The level of yield is not guaranteed and may rise or fall in the future. For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector, or security. Diversification does not ensure a profit or protect against loss. Any views expressed were held at the time of preparation and are subject to change without notice. Index returns assume reinvestment of all distributions and do not reflect fees or expenses. You cannot invest directly in an index. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Costs may vary with fluctuations in the exchange rate. Source: HSBC Asset Management. Macrobond, Bloomberg. Data as at 7.30am UK time 13 March 2026.
For informational purposes only and should not be construed as a recommendation to invest in the specific country, product, strategy, sector or security. Any views expressed were held at the time of preparation and are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. Source: HSBC Asset Management. Data as at 7.30am UK time 13 March 2026.
Global equity markets were on course to finish the week mixed but mostly lower, with investors cautious amid geopolitical tensions and the ongoing oil price shock. In the US, major stock indices extended weekly losses. European markets outperformed, with the Euro Stoxx 50 set to edge higher. Conversely, Japanese indices drifted lower despite a weaker yen. Other Asian markets broadly weakened: Sensex dropped, while Kospi retreated further. Both Hang Seng and Shanghai Composite index fell. Among other emerging markets, Latin American stocks consolidated following recent declines. The US dollar posted modest gains against major currencies, with gold prices paring losses. Oil-driven inflation jitters pushed 10-year government bond yields higher, led by UK Gilts. US Treasuries broadly weakened ahead of this week’s Fed rate decision.
This document or video is prepared by The Hongkong and Shanghai Banking Corporation Limited (‘HBAP’), 1 Queen’s Road Central, Hong Kong. HBAP is incorporated in Hong Kong and is part of the HSBC Group. This document or video is distributed and/or made available, HSBC Bank (China) Company Limited, HSBC Bank (Singapore) Limited, HSBC Bank Middle East Limited (UAE), HSBC UK Bank Plc, HSBC Bank Malaysia Berhad (198401015221 (127776-V))/HSBC Amanah Malaysia Berhad (20080100642 1 (807705-X)), HSBC Bank (Taiwan) Limited, HSBC Bank plc, Jersey Branch, HSBC Bank plc, Guernsey Branch, HSBC Bank plc in the Isle of Man, HSBC Continental Europe, Greece, The Hongkong and Shanghai Banking Corporation Limited, India (HSBC India), HSBC Bank (Vietnam) Limited, PT Bank HSBC Indonesia (HBID), HSBC Bank (Uruguay) S.A. (HSBC Uruguay is authorised and oversought by Banco Central del Uruguay), HBAP Sri Lanka Branch, The Hongkong and Shanghai Banking Corporation Limited – Philippine Branch, HSBC Investment and Insurance Brokerage, Philippines Inc, and HSBC FinTech Services (Shanghai) Company Limited and HSBC Mexico, S.A. Multiple Banking Institution HSBC Financial Group (collectively, the “Distributors”) to their respective clients. This document or video is for general circulation and information purposes only.
The contents of this document or video may not be reproduced or further distributed to any person or entity, whether in whole or in part, for any purpose. This document or video must not be distributed in any jurisdiction where its distribution is unlawful. All non-authorised reproduction or use of this document or video will be the responsibility of the user and may lead to legal proceedings. The material contained in this document or video is for general information purposes only and does not constitute investment research or advice or a recommendation to buy or sell investments. Some of the statements contained in this document or video may be considered forward looking statements which provide current expectations or forecasts of future events. Such forward looking statements are not guarantees of future performance or events and involve risks and uncertainties. Actual results may differ materially from those described in such forward-looking statements as a result of various factors. HBAP and the Distributors do not undertake any obligation to update the forward-looking statements contained herein, or to update the reasons why actual results could differ from those projected in the forward-looking statements. This document or video has no contractual value and is not by any means intended as a solicitation, nor a recommendation for the purchase or sale of any financial instrument in any jurisdiction in which such an offer is not lawful. The views and opinions expressed are based on the HSBC Global Investment Committee at the time of preparation and are subject to change at any time. These views may not necessarily indicate HSBC Asset Management‘s current portfolios’ composition. Individual portfolios managed by HSBC Asset Management primarily reflect individual clients’ objectives, risk preferences, time horizon, and market liquidity.
The value of investments and the income from them can go down as well as up and investors may not get back the amount originally invested. Past performance contained in this document or video is not a reliable indicator of future performance whilst any forecasts, projections and simulations contained herein should not be relied upon as an indication of future results. Where overseas investments are held the rate of currency exchange may cause the value of such investments to go down as well as up. Investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in some established markets. Economies in emerging markets generally are heavily dependent upon international trade and, accordingly, have been and may continue to be affected adversely by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been and may continue to be affected adversely by economic conditions in the countries in which they trade. Investments are subject to market risks, read all investment related documents carefully.
This document or video provides a high-level overview of the recent economic environment and has been prepared for information purposes only. The views presented are those of HBAP and are based on HBAP’s global views and may not necessarily align with the Distributors’ local views. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. It is not intended to provide and should not be relied on for accounting, legal or tax advice. Before you make any investment decision, you may wish to consult an independent financial adviser. In the event that you choose not to seek advice from a financial adviser, you should carefully consider whether the investment product is suitable for you. You are advised to obtain appropriate professional advice where necessary.
The accuracy and/or completeness of any third-party information obtained from sources which we believe to be reliable might have not been independently verified, hence Customer must seek from several sources prior to making investment decision.
The following statement is only applicable to HSBC Mexico, S.A. Multiple Banking Institution HSBC Financial Group with regard to how the publication is distributed to its customers: This publication is distributed by Wealth Insights of HSBC México, and its objective is for informational purposes only and should not be interpreted as an offer or invitation to buy or sell any security related to financial instruments, investments or other financial product. This communication is not intended to contain an exhaustive description of the considerations that may be important in making a decision to make any change and/or modification to any product, and what is contained or reflected in this report does not constitute, and is not intended to constitute, nor should it be construed as advice, investment advice or a recommendation, offer or solicitation to buy or sell any service, product, security, merchandise, currency or any other asset.
Receiving parties should not consider this document as a substitute for their own judgment. The past performance of the securities or financial instruments mentioned herein is not necessarily indicative of future results. All information, as well as prices indicated, are subject to change without prior notice; Wealth Insights of HSBC Mexico is not obliged to update or keep it current or to give any notification in the event that the information presented here undergoes any update or change. The securities and investment products described herein may not be suitable for sale in all jurisdictions or may not be suitable for some categories of investors.
The information contained in this communication is derived from a variety of sources deemed reliable; however, its accuracy or completeness cannot be guaranteed. HSBC México will not be responsible for any loss or damage of any kind that may arise from transmission errors, inaccuracies, omissions, changes in market factors or conditions, or any other circumstance beyond the control of HSBC. Different HSBC legal entities may carry out distribution of Wealth Insights internationally in accordance with local regulatory requirements.
Important Information about the Hongkong and Shanghai Banking Corporation Limited, India (“HSBC India”)
HSBC India is a branch of The Hongkong and Shanghai Banking Corporation Limited. HSBC India is a distributor of mutual funds and referrer of investment products from third party entities registered and regulated in India. HSBC India does not distribute investment products to those persons who are either the citizens or residents of United States of America (USA), Canada or New Zealand or any other jurisdiction where such distribution would be contrary to law or regulation.
The following statement is only applicable to HSBC Bank (Taiwan) Limited with regard to how the publication is distributed to its customers: HSBC Bank (Taiwan) Limited (“the Bank”) shall fulfill the fiduciary duty act as a reasonable person once in exercising offering/conducting ordinary care in offering trust services/ business. However, the Bank disclaims any guarantee on the management or operation performance of the trust business.
The following statement is only applicable to PT Bank HSBC Indonesia (“HBID”): PT Bank HSBC Indonesia (“HBID”) is licensed and supervised by Indonesia Financial Services Authority (“OJK”). Customer must understand that historical performance does not guarantee future performance. Investment product that are offered in HBID is third party products, HBID is a selling agent for third party product such as Mutual Fund and Bonds. HBID and HSBC Group (HSBC Holdings Plc and its subsidiaries and associates company or any of its branches) does not guarantee the underlying investment, principal or return on customer investment. Investment in Mutual Funds and Bonds is not covered by the deposit insurance program of the Indonesian Deposit Insurance Corporation (LPS).
Important information on ESG and sustainable investing
Today we finance a number of industries that significantly contribute to greenhouse gas emissions. We have a strategy to help our customers to reduce their emissions and to reduce our own. For more information visit www.hsbc.com/sustainability.
In broad terms “ESG and sustainable investing” products include investment approaches or instruments which consider environmental, social, governance and/or other sustainability factors to varying degrees. Certain instruments we classify as sustainable may be in the process of changing to deliver sustainability outcomes. There is no guarantee that ESG and Sustainable investing products will produce returns similar to those which don’t consider these factors. ESG and Sustainable investing products may diverge from traditional market benchmarks. In addition, there is no standard definition of, or measurement criteria for, ESG and Sustainable investing or the impact of ESG and Sustainable investing products. ESG and Sustainable investing and related impact measurement criteria are (a) highly subjective and (b) may vary significantly across and within sectors.
HSBC may rely on measurement criteria devised and reported by third party providers or issuers. HSBC does not always conduct its own specific due diligence in relation to measurement criteria. There is no guarantee: (a) that the nature of the ESG / sustainability impact or measurement criteria of an investment will be aligned with any particular investor’s sustainability goals; or (b) that the stated level or target level of ESG / sustainability impact will be achieved. ESG and Sustainable investing is an evolving area and new regulations are being developed which will affect how investments can be categorised or labelled. An investment which is considered to fulfil sustainable criteria today may not meet those criteria at some point in the future.
THE CONTENTS OF THIS DOCUMENT OR VIDEO HAVE NOT BEEN REVIEWED BY ANY REGULATORY AUTHORITY IN HONG KONG OR ANY OTHER JURISDICTION. YOU ARE ADVISED TO EXERCISE CAUTION IN RELATION TO THE INVESTMENT AND THIS DOCUMENT OR VIDEO. IF YOU ARE IN DOUBT ABOUT ANY OF THE CONTENTS OF THIS DOCUMENT OR VIDEO, YOU SHOULD OBTAIN INDEPENDENT PROFESSIONAL ADVICE.
© Copyright 2026. The Hongkong and Shanghai Banking Corporation Limited, ALL RIGHTS RESERVED.
No part of this document or video may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of The Hongkong and Shanghai Banking Corporation Limited.
