Market update: Key trends, risks, and opportunities

In this monthly market update, Jacqueline Hogan speaks with Ian Slattery, Head of Investment Solutions, to unpack the key forces shaping markets through April and early May. From strong equity performance to bond market uncertainty, the discussion highlights both opportunities and risks for investors.

Market overview: Resilient equities, volatile bonds

Despite geopolitical tensions, markets showed surprising strength. “Markets were quite resilient in April and equities rose quite strongly,” Ian explains.

Two major forces drove this – strong corporate earnings and continued optimism around artificial intelligence (AI).

“At the same time bonds experienced volatility, oil prices fluctuated amid geopolitical uncertainty and nine of the 11 sectors were in positive territory, which is very positive,” Ian adds.

Why equities surged in April

Equities outperformed sharply after a weaker March.

The main driver was earnings season with end of Q1 earnings performing well.

Additional factors according to Ian were: “AI-related growth expectations boosted technology stocks and positive sentiment spread across most sectors.”

Meanwhile, equities diverged from bonds.

Fixed income and interest rate pressures

Bond markets faced ongoing pressure due to inflation concerns and rising yields. “Higher oil feeds into higher inflation and that hit bond prices negatively,” Ian explains.

From an investment perspective caution is being applied to fixed income and duration risk (interest rate sensitivity) is being reduced.

“We are a little bit more cautious on our fixed income as we don’t wan too much exposure. However, opportunities remain in government bonds and corporate credit.”

Sector and regional performance

Key outperformers in 2026 so far:

• Energy – driven by higher oil prices.
• Industrials and materials – passing on cost increases.
• Technology – fuelled by AI.

Regional trends:

• The US market has strengthened relative to 2025.
• With over 70% of global equities in the US, its performance heavily influences global returns

“If the US does well the global stock market tends to do well,” Ian adds.

Commodities: Energy, metals and gold

Oil prices were highly reactive to geopolitical developments. A notable development was seen when the UAE signalled plans to leave OPEC, raising long-term supply questions.

Gold was surprisingly an underperformer, and despite geopolitical tensions, gold did not rally as expected.

Two reasons explain this. Higher interest rates reduce its appeal and investors sold gold for liquidity. “If people needed to sell something… you’ll sell… something that’s quite liquid, which is gold.”

Currency markets and the dollar debate

Currency markets showed mixed signals. The US dollar initially strengthened during geopolitical stress and gains later reversed.

“Our long-term perspective is that the EUR/USD has fluctuated widely historically and current levels align with the long-term average. This raises questions about the dollar’s long-term dominance and potential structural shifts in global finance,” Ian explains.

Key risks and investment positioning

Zurich’s investment positioning and current strategy highlights:

• Neutral stance on equities.
• Reduced US equity exposure.
• Underweight duration in fixed income.
• Select gains taken in oil.

Key risks to watch

1. Geopolitical tensions.
2. AI investment cycle risks.
3. Balancing inflation.
4. Responding to oil price pressures.

Conclusion

The April–May period highlighted a clear divide across markets. Equities surged on strong earnings and AI optimism. Bonds struggled with inflation uncertainty and commodities remained volatile, especially oil.

For investors, the environment presents both:

• Risks (geopolitics, rising rates, AI debt).
• Opportunities (sector dispersion, active allocation).

“There’s a lot of different divergence and for us as active managers that creates an opportunity,” Ian concludes.