The war in Iran (which commenced in late February when the US and Israel launched air strikes at Iran) dominated headlines, causing heightened volatility and pressure upon global equity markets. The ASX All Ordinaries Accumulation Index suffered its sharpest decline in nearly 4 years, falling - 7.3%. The ASX Small Ordinaries Accumulation Index was hit harder, declining -11.0%. From a sector perspective, Energy was easily the top performer (+19.2%), whilst Defensive sectors such as Utilities (+4.9%), Consumer Staples (+2.8%) Telecom (+2.5%) also fared relatively well. The hardest hit sectors included Gold (-23.4%) and Technology (-12.9%) as investor risk aversion increased.

US markets held up relatively well compared to their international counterparts, with the S&P 500 and NASDAQ falling -5.1% and -4.8% during the month, respectively. The outperformance vs the ASX and other major indices such as the Euro Stoxx 50 (-9.3%) and FTSE 100 (-6.7%) may reflect the US' greater energy resilience and the perceived status of the US dollar as a safe-haven asset.

Whilst the volatility in recent months is clearly difficult emotionally, we would emphasise the importance of taking a long-term view. We continue to focus on the underlying business performance of the companies in our portfolio, as opposed to stock price movements. The recent declines in a wide range of stocks has created some excellent investment opportunities which we expect to drive returns over the next few years.

In bond markets, the US 10-year bond yield recorded a sharp increase, rising +38 basis points (bp) to 4.32%, as similar to the US dollar, it was sought by investors as a safe-haven asset amidst the ongoing conflict in Iran. Its Australian counterpart also rose sharply, recording a +32 basis point increase to 4.97%. The Australian dollar fell -3.1% to US$0.69, implying a decline of 2.1 cents.

In this update, we present the quarterly State of Trend report for Q1, 2026. 

Our report covers the performance of trend following systems compared with traditional investments such as the S&P/ASX 200 Total Return index, and the Australia "60/40" portfolio. Trend following provides exposure to a diverse pool of underlying instruments, and implements trading strategies systematically and without emotional biases.

Trend following outperforms Australian traditional assets

In Q1 2026, traditional risk assets delivered negative returns, with the ASX200 and a 60/40 portfolio both finishing the quarter in the red amid escalating geopolitical risk and a sharp energy shock. Trend-following systems delivered strong positive returns, benefitting from equities and metals in the first two months of the quarter, and from the energy surge in March.

Key market movements in Q1 2026

• Markets navigated a quarter defined by escalating geopolitical tension, with the outbreak of the US-Iran conflict in March triggering an energy shock that sharply repriced inflation expectations and growth prospects

  • Equity markets fell broadly as risk-off sentiment intensified through the quarter

  • Fixed income markets also declined, with both Australian and US 10-year bonds finishing in the red as markets priced rate hikes in response to rising inflationary pressures

• Commodities provided the most dramatic moves this quarter

  • Energy markets surged on supply disruption fears following the effective closure of the Strait of Hormuz

  • Precious metals delivered positive returns despite a sharp sell-off in late March

• Trend-following strategies saw strong results early in Q1, driven by sustained momentum particularly in global equity markets. March brought whipsaw conditions as the energy shock triggered rapid reversals across several markets. Despite this, trend-following outperformed traditional assets for the quarter, demonstrating the benefits of a diversified rules-based approach

Featured chart - Crude Oil

• Crude Oil dominated the quarter, up 80% as the US-Iran conflict triggered fears of sustained supply disruption through the Strait of Hormuz. The rapid and sustained nature of the move created a strong trending environment across energy markets

• The scale of the energy shock raises the prospect of a broader shift in market regime. Trend following systems are designed to identify and adapt to such transitions, repositioning systematically as new trends emerge across asset classes

See the full report at our website.

Global energy consumption is accelerating. It's being driven by power-hungry artificial intelligence (AI) development, the rise of robotics and automation, and the electrification of transport and industry. 

At the same time, the energy transition is intensifying investment in renewable power, alongside the need for significant grid building and modernisation.

These trends are highly dependent on a relatively small group of minerals -- including copper, aluminium and rare earth elements -- which are essential for electric vehicles, batteries, semiconductors and renewable infrastructure. 

Demand for these critical materials is rising, while supply remains constrained...

Demand for these critical materials is rising, while supply remains constrained because of long project lead times and limited new capacity. This imbalance may provide sustained pricing support and attractive long-term investment opportunities.

Our Future Minerals strategy invests in global companies that are positioned at the forefront of this transition -- both within the extraction industry and across the wider minerals value chain.

What differentiates our Future Minerals approach?

A key differentiator of our strategy is our quality-led, ESG (environmental, social and governance)-integrated approach. From an initial universe of around 1,500 companies, inclusion requires at least 20% revenue exposure to the future minerals theme, alongside robust quality and ESG credentials.

Companies must pass ESG screens, with a preference for strong governance, environmental practices and risk management. This helps to mitigate tail risks in a complex and often volatile sector.

The portfolio invests across four core areas: 

• Mineral extraction and processing (over 60%)

• Upstream and downstream value-chain exposure (15-30%)

• Compounds and advanced materials (5-15%)

• Recycling and sustainability solutions (5-10%)

This structure provides diversified exposure across the full minerals ecosystem, rather than reliance on pure-play miners alone.

Opportunities

In a concentrated global-equity market, the portfolio offers diversification through low US exposure and minimal exposure to technology -- two areas that dominate global indices.

Structural demand drivers are also becoming more visible. Electrification, renewable energy deployment, grid upgrades and rapid AI adoption are increasing global energy intensity. Copper is central to this demand.

Pathways to greater energy security

The ongoing conflict in the Middle East underscores the strategic importance of critical minerals, reinforcing the case for electrification and renewable energy as key pathways to greater energy security and reduced reliance on oil and third-party energy sources.

Data centre energy demand to soar

Data centres currently account for around 3% of US energy consumption, a figure projected to increase to around 12% by 2030 (McKinsey, 2024). Meeting this demand reinforces the need for both clean energy infrastructure and the minerals required to build it.

Ex-China beneficiaries to emerge?

Many critical materials, including rare earths, remain highly concentrated in China. Efforts by the US and EU to diversify supply chains are accelerating, which creates opportunities in regions that are trying to de-risk their mineral value chains. MP Materials, the top contributor in 2025, illustrates this trend, and we expect further ex-China beneficiaries to emerge during 2026.

While commodity markets can be volatile and short-term cyclicality is to be expected, we believe the long-term fundamentals of the asset class remain structurally attractive and that the strategy is well-positioned to capture opportunities in 2026 and beyond.

Key sectors in the portfolio

Copper

Copper is the poster child of critical minerals. It's a key theme within the portfolio, with around 30% exposure. It's fundamental to electrification and has no practical substitute as an electricity conductor. Following a 44% rise in the London Metal Exchange's spot price in 2025, demand resilience will be tested in 2026. However, copper's relatively low cost within end-use applications suggests higher prices can be absorbed without affecting demand.

Supply remains constrained because of disruption at major producers and long project lead times, while merger and acquisition activity highlights the strategic value of high-quality assets. We expect these supply challenges to keep the market tight well into 2026.

Uranium

Uranium is benefiting from a global renaissance in nuclear energy. In 2025, Western governments reaffirmed nuclear power as a core pillar of energy security and decarbonisation. China continues its nuclear expansion at full speed. Inventories have been drawn down over the past decade, mining activity has lagged demand, and supply remains highly concentrated. With uranium accounting for less than 10% of nuclear operating costs, demand elasticity is extremely low. Against this backdrop, we see 2026 as a potential inflection point for the uranium market. The strategy has around 8% exposure to uranium. This includes a holding in Kazatomprom, the world's largest and lowest-cost producer, which also benefits from comparatively strong environmental credentials given its in-situ recovery extraction methods.

Outlook for 2026

Despite heightened geopolitical uncertainty, commodity markets performed strongly in 2025. We think this momentum will extend into 2026. A broad rotation away from software and growth�'heavy assets towards hard assets and materials supports our position. The portfolio currently has around 75% exposure to mining companies -- an area where investors remain structurally underweight, with basic materials accounting for just 3.8% of the MSCI All Countries World Index (Morningstar, 31 January 2026).