Understanding the 2026 Tax Landscape for Investors - an update

Market Commentary Quarter One March 2026

This Quarterly Market Commentary is written for clients of LHP Accountants by Darren Lloyd Thomas of Thomas and Thomas Wealth Management.

The past quarter has perhaps been the most interesting of my twenty-eight year career in wealth management. Throughout the last few decades, we have seen global markets all moving in sync with one another.

This made diversification quite challenging within our clients’ portfolios because many assets behaved in a similar way.

I remember in 2008 hearing constantly how ‘modern portfolio theory was broken’ because all markets were moving up and down together. The argument was that this theory had been developed (by Harry Markowitz) when it was a very different world in the 1950’s.

Back in 1954 - Protectionism and Isolationism dictated global politics.

These days, we have learned to live together and trade globally, right? 

Apparently not so much in 2026.

Just take a look at these stats from mid-November 2025 to mid-February this year:

• Japan’s Nikkei 225 index was up a whopping 16% whilst the US S&P 500 index was only up by a modest 1.6%.

• Over here, our UK FTSE 100 was up some 13.7% whilst the German DAX index was up a measly 0.66%

  
  

If you lift the lid on these markets a little further, the divergence really starts to show with Armaments and Mining stocks continuing to soar whilst Tech (A.I.) stocks struggle to hold their ground.

Different currencies are starting to shift considerably against one another.

Then there’s those Trump trade tariffs – probably best not to even mention that. 

We have heard repeatedly in the media how the world is changing rapidly. In fairness (in the words of Dame Shirley Bassey) ‘It’s all just a little bit of history repeating’. 

Suddenly, that modern portfolio theory from the 1950’s looks quite attractive.

Only there’s a real overlay to all of this. You really need to understand what you are holding within your portfolio.

For the past three decades, markets were fairly forgiving to fund managers, with marginal differences in performance that allowed you to overlook a few percent here and there.

Now the game has changed radically and the cost of holding the wrong stocks, wrong funds or wrong asset allocation could be lifechanging. 

This is where the rubber really hits the road for wealth managers. Ultimately, a financial plan that is powered by a stalling engine is a financial plan in trouble.  There is really no substitute for diligence in checking what lies under the surface of your clients’ portfolio.

This is where we come in.

I don’t advocate ‘knee jerk’ reactions to throw out a load of funds just because they are not currently enjoying the Gold and Guns rush.

I do, however, advocate extreme care in regularly monitoring our clients’ underlying funds and checking that they continue to deliver the role we first employed them for.

This quarter, all of our client portfolios enjoyed growth. This was significantly more in the Mainstream portfolios, but we were pleased to deliver good news to everyone.

You just can’t ignore the politics at play around the world when it comes to portfolio management.

Just for example…..

In Germany, the worlds third largest economy is very sluggish - whilst the government deals with a dual threat from the US. On the one hand, their motor industry is facing huge barriers to sell into America whilst on the other hand - they no longer feel safe on their Eastern borders. This has led the German government to hurriedly allocate considerable resource to military provision. 

In the US, trade tariffs and supreme court battles have left importers and exporters in a true pickle. We expect some real challenges ahead for US businesses. Inflation is still stubbornly high and the central bank (the FED) refuses to eliminate the possibility of interest rate rises in time. This is troubling for their money supply (which powers their consumer led economy.)

Japan, however, is enjoying a great time of it! A few years ago, their government changed the law to make Japanese domestic companies pay higher dividends and stop holding such large cash reserves. They also incentivised domestic Japanese investors to hold Japanese companies within their portfolios. These changes (coupled with a weaker Yen and a powerful government message) have all led to considerable international investment back into the worlds fourth largest economy.

Emerging Market funds have also enjoyed a truly exciting quarter as they benefit from all that Mr Trump is doing to weaken the US dollar as the worlds most powerful currency – helping these Emerging Countries to export their products more cheaply. It would seem that America is indeed Making Emerging Markets Great Again!

It is a really strange world out there at the moment, but I am confident we can continue to navigate change – keeping that engine running smoothly despite a few bumps in the road.

You can hear lots more of our thoughts on these topics via our special podcast (sometimes starring LHP’s very own Rachael Ball!) called ‘Your Money Talks’ which you can download via all the usual podcast channels or our website: www.thomasandthomasfinance.co.uk 

My very best wishes.

The views expressed in this article are attributable to Thomas and Thomas Wealth Management (FCA Number 479335) not LHP Accountants - and in no way constitute financial advice. You must not act on any of the information within this article without first seeking independent financial advice. 

Investments and investment based products have varying degrees of risk attached to them. Unless the particular product has guarantees expressly incorporated, future investment performance is not guaranteed and you may get back less than your original investment. The value of capital and any income arising may fall as well as rise.  Past performance is not a reliable indicator of future performance.