📊 Last Week in Review (Week ending 21 March 2026)

Performance snapshot (levels + weekly % + YTD):

• FTSE 100: 9,918.33 | -3.3%
• S&P 500: 6,506.48 | -1.9%
• MSCI World: 4,244.09 | -2.0%
• UK 10y gilt yield: 5.00% (+14.7 bp on Friday) | US 10y: 4.38% (+10.1 bp)
• GBP/USD: 1.3376 (+1.2% w/w) | Brent: $112.19 (+3.3%)

What moved markets:

• The main shock was oil. Brent pushed above $112 as the Middle East war raised fears of a longer energy disruption and a renewed inflation pulse.
• That fed straight into rates. Investors sold government bonds and sharply reduced rate-cut hopes, with U.S. and UK yields jumping and markets starting to price a much more hawkish path.
• Equities then de-rated on both fronts: higher discount rates and weaker growth confidence. The S&P 500 logged a fourth straight weekly fall and the FTSE 100 gave back its 2026 gains.

Sector & style:

• Worst sector: UK aerospace & defence -2.5% on Friday; banks were also hit at -2.0%.
• Best sector: energy was the relative winner, staying near record highs even after a -1.7% Friday pullback.
• Growth vs Value: value held up better, with the Dow beating the Nasdaq by roughly 1.0 percentage point on Friday.
• Large vs Small: in the UK, FTSE 250 outperformed FTSE 100 by about 0.4 percentage points on Friday.

So what?

• Markets enter this week in a fragile state: both the BoE and Fed have taken rate cuts firmly off the near-term table, leaving equities to stand on their own earnings fundamentals — a tough ask with margins under cost pressure

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🌟 The Defining Narrative

Can markets absorb an oil shock without fully repricing to stagflation?

Why it matters :

• Higher oil pushes up inflation expectations, lifts bond yields and makes central banks less able to ease. That hits equities twice: once through a higher discount rate, and again through weaker confidence in margins and growth.

UK investor angle :

• A UK global portfolio is pulled in two directions: energy-heavy UK equities can cushion part of the shock, but gilts and growth equities become more vulnerable if rate expectations keep rising.
• Sterling may hold up better than many expected if the BoE stays hawkish, but that can also trim the GBP value of unhedged overseas gains.

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🏦 Central Bank Watch

No rate decisions are scheduled this week following the central bank meetings last week

Bank of England

• What’s scheduled: BoE speakers this week include Huw Pill on Tuesday 13:30, plus Sarah Breeden on Thursday 09:30, Megan Greene on Thursday 16:30, and Alan Taylor later Thursday.
• Market pricing: markets are now pricing roughly a 70% chance of a 25bp BoE hike by April.
• Key thing to listen for: whether officials describe the energy shock as a temporary hit or something that risks broader wage and price persistence.
• UK implications: this is directly about gilts, mortgage pricing and GBP. A hawkish read-through keeps upward pressure on short gilts and supports sterling.

Federal Reserve

• What’s scheduled: Fed Chair Powell speaks on Tuesday 17:30 UK, with several Fed officials also due later in the week.
• Market pricing: markets have swung from pricing cuts to pricing roughly 4bp of hikes this year.
• Key thing to listen for: whether Fed speakers lean into “wait and see” or acknowledge that energy-driven inflation risks are becoming policy-relevant.

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🌍 Macro Calendar

Tue 24 Mar, 08:30 — Germany — Flash Manufacturing PMI — Consensus: ~51.0

Tue 24 Mar, 08:30 — Germany — Flash Services PMI — Consensus: ~52.5

Tue 24 Mar, 09:00 — Eurozone — Flash Composite PMI — Consensus: ~52.0

Tue 24 Mar, 09:30 — UK — Flash Manufacturing PMI — Consensus: ~47.5

Tue 24 Mar, 09:30 — UK — Flash Services PMI — Consensus: ~54.0

Tue 24 Mar, 13:45 — US — Flash S&P Global Composite PMI — Consensus: ~52.0

Wed 25 Mar, 07:00 — UK — CPI (Feb, YoY) — Consensus: ~3.2%

Wed 25 Mar, 07:00 — UK — Core CPI (Feb, YoY) — Consensus: ~3.2%

Wed 25 Mar, 00:30 — Australia — Monthly CPI (Trimmed Mean) — Consensus: ~3.8%

Thu 26 Mar, 13:30 — US — Durable Goods Orders (MoM) — Consensus: ~+0.5%

Thu 26 Mar, 13:30 — US — Initial Jobless Claims — Consensus: ~220k

Fri 27 Mar, 07:00 — UK — Retail Sales (Feb, MoM) — Consensus: ~+0.3%

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📊 Earnings Watch

No FTSE 100 heavyweights or US mega-caps report this week — it sits between major earnings seasons. However, a handful of names merit attention:

UK / Europe

• NEXT (NXT) — Thursday:
  • What matters: FY results, guidance and commentary on UK consumer spending.
  • The “tell” headline: margin resilience despite wage and cost pressure would be taken well.
  • Read-across: UK retail, domestic demand and FTSE earnings quality.
• H&M (HM B) — Thursday:
  • What matters: inventory discipline, markdowns and gross margin.
  • The “tell” headline: a cleaner margin story would support the idea that European consumption is slowing, not collapsing.
  • Read-across: apparel, European discretionary and input-cost discipline.

US:

Carnival (CCL) — Friday:

• What matters: booking trends, onboard spending and fuel-cost commentary.
• The “tell” headline: if demand stays strong even with higher energy costs, travel can still hold up.
• Read-across: leisure, airlines and the wider consumer confidence trade.

💷 Fixed Income & Currency Outlook

A) UK Gilts / Rates

• Facts: 10y Gilt at ~4.60%, 2y at ~3.88%, 30y at ~5.44% — the curve is steeply positive (30y–2y spread ~156 bps), reflecting both term premium and long-dated inflation concerns
• View: Neutral to Underweight duration — the BoE’s hawkish pivot removes the near-term catalyst for yield compression; Wednesday’s CPI is the swing factor
• Watchlist: UK CPI Wednesday; any MPC member speech; DMO gilt issuance calendar
• Portfolio angle: Favour short-duration gilts (2–5y) over the long end; gilts underperform global bonds if CPI surprises to the upside

B) FX (GBP focus)

• Facts: GBP/USD 1.3340 (down 0.67% on the week, down 1.13% over one month but up 3.24% YoY)
• View: Range-bound to slightly bearish GBP near-term — the BoE hold removes a hawkish GBP catalyst; rate differential with USD remains compressedtradingeconomics+1
• Watchlist: UK CPI (Wed) — a downside surprise accelerates GBP weakness; risk-off from Middle East escalation supports USD over GBP
• Portfolio angle: Unhedged US equity exposure gets a small currency tailwind if GBP/USD drifts toward 1.32; European equity holdings face modest GBP headwind if EUR/GBP firms on German PMI beat

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🧠 Sentiment Check

• Current mood: Risk-off
• VIX / MOVE: VIX near 27; CNN Fear & Greed at 15, which is squarely extreme fear. Reuters’ MOVE quote page also shows bond volatility up 69% over one month as of 20 March.
• Rates: U.S. 10y yields rose to about 4.38% on Friday and were back near 4.42% early Monday.
• Credit spreads: market stress indicators have widened, with Reuters noting higher corporate hedging costs and wider high-yield spreads.
• CNN FEAR & GREED INDEX: 15 to 17.3, which says investors are defensive and quick to fade rallies.

• Positioning / flows (2–4 bullets):
  • EPFR data showed $20.3bn pulled from global equity funds in the week to 18 March, the biggest outflow in three months.
  • At the same time, BofA said investors still put $62.2bn into equities, $10.2bn into bonds and $23.5bn into cash — classic “buy the dip, but keep a cushion” behaviour.
• Implication (1–2 bullets):
  • Sentiment is weak enough for relief rallies, but not washed out enough to assume the downside is exhausted.
  • That means this week still looks like a headline-sensitive market, not a conviction trend market.

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📈 Valuations & Expectations

Valuation snapshot:

• S&P 500 fwd P/E: ~21x — above its 10-year average of ~18x; the index remains priced for earnings perfection at a time when YTD returns are deeply negative
• FTSE 100 fwd P/E: ~11–12x — materially cheaper, reflecting UK macro headwinds but also structural undervaluation relative to history
• Implication: The US market offers far less margin of safety; FTSE 100’s discount is compelling for long-term value investors but requires confidence in UK earnings resilience

Earnings expectations:

• Next-year EPS growth (consensus): US ~8–10% (under downward revision pressure as rate path expectations reset) | UK ~5–7% (energy/mining heavyweights providing support)
• Revisions trend: Deteriorating in the US (rate shock, input cost pressure, tariff overhang); UK revisions mixed — energy up, consumer and housebuilders down
• Beat-rate context: Not peak earnings season; macro data surprises will dominate EPS narrative this week

So what?

• For US equity positions, the core risk is multiple compression — not an earnings disaster, but a slow re-rating from ~21x toward ~18x as rates stay higher for longer
• UK equities look cheap on paper but need confirmation that domestic consumption isn’t rolling over — this Friday’s Retail Sales print is therefore a valuation catalyst, not just a data point

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🗳️ Geopolitics & Wildcards

• Event: Middle East conflict — US/Israeli strikes on Iran (28 Feb); ongoing disruption to Strait of Hormuz shipping
  • Impact channel: Oil prices, LNG, global inflation, shipping costs
  • What to watch: Any escalation involving Jebel Ali/Gulf ports or tanker interdiction; Brent crossing $90 would re-price inflation paths globallyreuters+1
  • Most sensitive assets: Brent crude, energy equities, GBP (UK import bill), EM FX, airline stocks
• Event: US trade tariff posture — ongoing uncertainty over scope and exemptions
  • Impact channel: Global supply chains, corporate margins, US consumer prices
  • What to watch: Any White House announcement on tariff escalation or exemption deals
  • Most sensitive assets: Industrials, semiconductors, S&P 500 broadly, USD
• Event: European defence spending ramp-up — German fiscal U-turn and EU rearmament plans
  • Impact channel: Defence equities, European bond yields (issuance rising), EUR
  • What to watch: Any new national procurement announcements or EU-level bond issuance confirmation
  • Most sensitive assets: European defence stocks (Rheinmetall, BAE Systems), Bunds, EUR/GBP

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⚡ The Bottom Line

• If Middle East tensions escalate further (Hormuz disruption widens) → then Brent surges, energy equities outperform sharply, and central banks face a stagflationary bind → watch UK-listed BP and Shell
• If flash PMIs hold up better than feared while Gulf headlines stabilise → then equities can stage a relief rally even without rate-cut hopes returning → watch the S&P 500 around 6,500 and whether the VIX eases back from the high-20s.
• If UK CPI (Wednesday) surprises to the upside (>3.4% YoY) → then gilt yields spike and BoE May cut gets fully priced out → watch GBP/USD break below 1.32 and FTSE 100 housebuilders/REITs sell off sharply

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© Clearly Investments Ltd. Educational information only. This is not investment advice.