Monthly Review – March 2026
OUR PERSPECTIVE
“The hottest places in hell are reserved for those who, in times of great moral crisis, maintain their neutrality.” ~ Dante Alighieri, Dante’s Inferno
War rarely begins with recession. It begins with interruption. A tanker route is threatened, an energy artery is questioned, insurance costs surge, freight is repriced, and suddenly the market is forced to rediscover a truth it had seemingly forgotten. Peace was embedded in every supply chain, every valuation, and every inflation forecast. The first effect is not collapse, but scarcity. The second is inflation. Only later comes the visible economic damage.
That is the sequence history teaches. The great oil shocks of the 1970s did not begin with recession. They began with a supply shock, then an inflation shock, then a prolonged period in which households absorbed the blow through falling real incomes and corporates absorbed it through margin compression. Policymakers hesitated. They have to. How can one support consumers when inflation is rising? Recession came later. It always does.
That is why the road forward is so dangerous. It is not binary. It is path dependent. In the near term, the most likely outcome is not immediate collapse, but a grinding repricing of vulnerability. Energy costs soar. Inflation expectations rise. Consumers feel poorer. Companies discover that pricing power is not infinite. Central banks then face the old stagflationary nightmare in a new and more fragile world: inflation is too high to ease aggressively, but growth is too weak to tighten without consequence.
And this is where the Fiscal Age becomes decisive. As we argue in our recent paper, we are no longer living in an era of monetary dominance, but one in which debt, demographics and political incentives increasingly subordinate central banks to fiscal necessity. The world is moving toward larger deficits, structurally higher state liabilities, greater inflation volatility, and the quiet erosion of monetary credibility. In that environment, the question is not whether policymakers remember Volcker. It is whether they can afford to behave like him.
Our view is that, medium- to long-term, they likely cannot. That leaves the most probable path as some form of financial repression: real rates held below inflation for extended periods, regulatory incentives pushing savings into sovereign debt, and the slow dilution of purchasing power used as the least visible form of default. Our Fiscal Age paper makes the point plainly: this is how debt burdens are most likely “resolved” — not through austerity, but through monetary dilution and recurring volatility. That is why gold becomes so valuable now. Gold is not merely a hedge against inflation. It is protection against policy hesitation, fiscal dominance and the loss of trust that follows when states become too indebted to defend the value of their currency. In the Permanent Portfolio framework, gold and inflation-linked bonds sit precisely where they should: in the quadrant that protects against currency devaluation and loss of confidence. In an era defined by inflation volatility, energy scarcity and political uncertainty, gold stops being optional and starts looking indispensable.
Stagflation is an economy suffering from weak or falling growth, rising unemployment, and persistent inflation at the same time. It is difficult for policymakers because measures to fight inflation can worsen recession, while policies to boost growth can in turn make inflation worse.
Market Review
Deflationary Boom Assets
(Equities, Corporate Bonds, EMD)
Risk assets endured a brutal March as the Iran war and the disruption around the Strait of Hormuz triggered a historic energy shock. Brent surged 63.29%, the Bloomberg Energy Spot Index rose 36.89%, and investors rapidly repriced the risks of higher inflation, weaker margins and fewer rate cuts. World equities fell (-7.07%, USD), with Europe ex-UK (-10.55%, USD), Japan (-12.07%, USD) and EM (-12.26%, USD) hit hardest, while the US proved relatively resilient at (-4.92%, USD). India was the weakest major market (-15.08%, USD), while the Magnificent 7 (-5.65%, USD) and world growth (-7.30%, USD) again lagged value (-6.76%, USD), reflecting both rich starting valuations and the pressure of higher discount rates. Credit also weakened, though less dramatically than equities: US corporates fell -1.98%, sterling corporates -3.51%, and EM hard-currency debt -2.89%.
Deflationary Bust Assets
(Government Bonds)
Government bonds failed to provide much shelter. Global sovereign markets sold off as the oil shock lifted inflation expectations and reduced confidence that central banks could ease meaningfully. The Fed kept rates at 3.50%-3.75%, the ECB left rates unchanged while warning that the Middle East war created upside inflation risks and downside growth risks, and the Bank of England also held at 3.75%. Against that backdrop, US Treasuries fell -1.74%, gilts -4.28% and Euro government bonds -2.63%. In short, duration struggled because the market feared stagflation more than recession.
Inflationary Boom Assets
(Commodities & Managed Futures)
This was the month’s clear winner. Oil and energy led everything higher as supply fears dominated, with Brent posting its biggest monthly rise since 1988. Copper fell -7.80%, suggesting the market was pricing the inflationary shock first and the demand destruction later. Managed futures were mildly negative on the month, with the SG CTA Index at -0.53% and the SG Trend Index at -1.16%, likely reflecting violent reversals as markets swung between escalation and hopes of de-escalation.
Inflationary Bust Assets
(Precious Metals & Inflation-Linked Bonds)
Precious metals corrected sharply, with gold down -11.57% and the Bloomberg Precious Metals Spot Index down -12.73%, even as inflation-linked bonds held up better than nominal government debt. That combination reflects the month’s core tension: rising oil pushed breakeven rates higher, helping linkers, but higher real yields, a firmer dollar and reduced expectations of near-term rate cuts hit gold after a very strong run into the shock. US TIPS fell just -1.34%, versus -1.74% for Treasuries, while Euro inflation-linked bonds fell -0.98%, comfortably ahead of nominal Euro government bonds.
CONTACT US
For further information on any of our services, or if you would like to arrange a meeting with an investment manager to see how we can work with you, please get in touch.
Disclaimer:
We try to ensure that the information provided is correct, but we do not give any express or implied warranty as to its accuracy. We do not accept any liability for errors or omissions. The content of this brochure is for guidance purposes only and does not constitute financial or professional advice.
Important information
Shard Capital Partners LLP is a limited liability partnership, registered in England with registration number OC360394. Shard Capital Partners LLP Registered office: Floor 3, 36-38 Cornhill, London, EC3V 3NG. Shard Capital Partners LLP is authorised and regulated by the Financial Conduct Authority in the United Kingdom, reference number 538762.
This document is provided for information purposes only and is intend for confidential and sole use by the recipient. It is not to be reproduced, copied or made available to others. The information set out in this document does not constitute investment advice or a personal recommendation. The views expressed in this document are not intended as an offer or a solicitation, to purchase or sell any security or other financial instrument, credit or lending product or to engage in any investment activity.
Past performance is not a guide to future performance. It is important that you understand that with investments, your capital is at risk. The value of investments, as well as the income derived from them, can go down as well as up and investors may get back less than the original amount invested. It is your responsibility to ensure that you make an informed decision about whether to invest with us, based on your particular objectives. If you are still unsure if investing is right for you, please seek independent advice.
The information and opinions expressed within this document are the views of (the company) and are based on information we believe to be reliable, but we do not represent that they are accurate or complete, and they should not be relied upon as such. Any information provided is given in good faith but is subject to change without notice.
No liability is accepted whatsoever by (the company) or its employees and associated companies for any direct or consequential loss arising from this document.
Disclaimer:
This document is provided for information purposes only and is intend for confidential and sole use by the recipient. It is not to be reproduced, copied or made available to others. The information set out in this document does not constitute investment advice or a personal recommendation. The views expressed in this document are not intended as an offer or a solicitation, to purchase or sell any security or other financial instrument, credit or lending product or to engage in any investment activity.
Past performance is not a guide to future performance. It is important that you understand that with investments, your capital is at risk. The value of investments, as well as the income derived from them, can go down as well as up and investors may get back less than the original amount invested. It is your responsibility to ensure that you make an informed decision about whether to invest with us, based on your particular objectives. If you are still unsure if investing is right for you, please seek independent advice.
The information and opinions expressed within this document are the views of (the company) and are based on information we believe to be reliable, but we do not represent that they are accurate or complete, and they should not be relied upon as such. Any information provided is given in good faith but is subject to change without notice.
No liability is accepted whatsoever by (the company) or its employees and associated companies for any direct or consequential loss arising from this document.