Key takeaways –
1) Geopolitics: A historical perspective
Recent events in the Middle East were clearly top of mind. Joe Aylott emphasised that on average, geopolitical events tend to cause volatility but often don't have a lasting impact on market returns. Joe and his team at Coutts have looked at around 40 geopolitical flashpoints since the 1950s, revealing a trend for markets to recover and typically strengthen within 12 months of a geopolitical shock. The exceptions occur when energy markets are disrupted and oil prices lead to higher inflation. This is not currently our long-term base case but it is potential risk that we’re monitoring.
2) 2026 did have a good start
Before the events in the Middle East came to dominate the headlines, the global economy had been performing relatively well, reporting the best year for global trade since 2011. Markets looked past uncertainty around new tariffs and were buoyed by signs that AI is boosting productivity. There was also limited impact from a soft period for the labour market.
Closer to home, the UK economy also showed signs of a decent start to the year with business confidence, retail sales and lending activity all looking promising.
3) Assessing potential threats to the economic outlook
Marcus Wright also mentioned energy prices and how they act as the vector through which events in the Middle East affect us in the UK. Historically, 20% of the world’s oil trade passes through the Strait of Hormuz, where the conflict has been ranging.
Additionally, the production and export of liquefied natural gas (LNG) at the world’s largest facility in Qatar has been halted. The resultant spike in gas prices is the biggest disruption to energy markets since Russia’s invasion of Ukraine in 2022. However, helpfully, we haven’t seen anywhere near the reaction in wholesale prices that we saw in 2022.
That is because market dynamics are different this time around: the fundamentals are more favourable and those affected have better contingency capabilities. It’s worth cautioning though that we don’t know how long this conflict could go on for and the longer it persists, the bigger the potential impact on inflation and broader economic demand. Consequently, there are a range of outcomes that we’re considering.
4) Investing through uncertainty: Fundamentals are still robust
While the geopolitical landscape feels unsettled, long‑term investment returns have remained remarkably strong. Our panel stressed that investors must learn to live with this cognitive dissonance, separating emotionally charged news from the underlying fundamentals that actually drive markets.
Over the long run, equities have far outperformed cash and bonds precisely because they involve bouts of discomfort and volatility. What matters most is not the daily news cycle but the health of the macroeconomic backdrop — employment levels, consumer spending, company earnings, and the broader economic momentum. Successful investing requires clarity about one’s risk tolerance, an understanding of worst‑case scenarios, and the discipline to remain invested through periods of uncertainty. Markets will always react to unforeseen events, but time and prudent risk management remain the most reliable drivers of long-term outcomes.
5) Portfolio positioning: Optimistic but risk‑aware
In terms of positioning, the team is currently optimistic about the global outlook, supported by strong economic fundamentals and record levels of corporate earnings. Portfolios are therefore tilted towards seeking growth through equity exposure, which is where the most compelling long‑term opportunities are found. In particular we have a new focus on emerging markets.
However, this optimism is balanced carefully with robust downside protection. The Coutts investment team, who manage Premier investment portfolios, use high‑quality government and corporate bonds to provide stability, while gold is used as a proven crisis hedge. They also use other alternative strategies, incorporated to diversify risk further by behaving differently from equity markets during periods of stress. The overarching aim is to manage “drawdown” — the depth of loss if there is a market fall — in line with each customers personal risk appetite, ensuring portfolios remain resilient while being positioned to capture growth.
Recent events reinforce the need for effective diversification in portfolios. We take a proactive approach to this to ensure that when risks occur, many of which are difficult or impossible to predict, diversifying assets within portfolios contribute to more robust outcomes for customers.
6) The Tax Landscape: Fiscal Drag, IHT Changes and Practical Planning
Tax specialist Irene Wolstenholme explains that many of the most significant tax impacts today arise not from headline-grabbing reforms but from the cumulative effect of frozen thresholds. Income tax bands, including the £12,570 personal allowance, remain fixed until 2031, while inheritance tax thresholds have been static for almost two decades. In Scotland, rates and thresholds on some sources of income are different to the rest of the UK, but again frozen thresholds at the higher bands are meaning that many people are paying a lot more than in previous years.
This “fiscal drag” means more individuals are crossing key thresholds, particularly around £100,000, where small increases in income can have large consequences for allowances and benefits. Looking ahead, meaningful inheritance tax changes relating to business assets and pension funds will require more proactive planning, especially given the role pensions now play as major assets.
With the tax year ending over Easter, practical planning needs to be completed earlier — effectively by 2 April — to make use of pensions, ISAs, annual gifts and other allowances.
7) The outlook for Scotland
Marcus Wright told us the latest Royal Bank of Scotland Growth Tracker suggests Scotland’s economy was struggling for momentum in January. However, Scotland can point to numerous areas of strength in recent years that suggest activity can rebound. Despite softening, the labour market in Scotland looks to have held up better relative to the wider UK, showing strong growth in key sectors, including professional services. Edinburgh and Glasgow have both revealed solid rates of growth while Sage data shows profit growth among Scotland’s small to medium businesses was solid in Q3 2025.
While the current uncertainty around the outlook for energy prices is a potential headwind to consumer spending, underlying factors point to a continued economic recovery in 2026.
This article and video are for information only — it does not constitute investment advice, and views shared may change. All investments involve risk, and the value of investments can fall as well as rise.
While we are tax aware and factor this into are thinking and planning for customers, we don’t give tax advice and recommend that customers should speak to a specialist tax adviser.
