In the first quarter of 2026, institutional capital is quietly flowing among major asset classes against a backdrop of geopolitical shifts and global risk aversion.
March saw particularly dramatic movements in gold. The London gold price once fell below $4,100 per ounce, nearly erasing all its gains for the year. Subsequently, gold plunged 10.49% in the week of March 20, marking its largest weekly decline in 43 years. Throughout March, the international gold price fell by approximately 15%.
As gold lost its luster, energy assets performed strongly while global stock markets generally faced pressure. As we enter April, where will investment strategies point in the second quarter? How do foreign institutions view subsequent market opportunities and risks? Interviews with multiple foreign investment institutions reveal their latest perspectives.
Crude oil has been the standout asset class in the past quarter. Directly impacted by shipping disruptions in the Strait of Hormuz, Brent crude surged 79.25% in Q1, while WTI crude rose 76.87%, recording the largest quarterly gains in decades. This contrasts sharply with the weakness in global equity markets, as market trading logic has rapidly shifted from early-year "rate-cut bets" to concerns about "stagflation."
Why has traditional safe-haven logic temporarily failed? Analysis indicates that recent gold price corrections are not uncommon—during periods of heightened market stress, investors often seek cash, initially pressuring gold. However, structural factors supporting gold's long-term outlook remain solid, and once the initial de-risking phase passes, gold is expected to resume its upward trend. Consequently, one institution maintains an overweight position in gold, raising its 3-month and 12-month target prices to $5,375 and $5,750 per ounce, respectively.
Another wealth management office shares a similar view, noting that while gold is intuitively seen as a safe haven during geopolitical tensions, its current price action suggests otherwise. Historically, gold hasn't always risen during conflicts. Current headwinds include energy-driven inflation, rate hike expectations, a stronger dollar, and investment outflows, but these are likely short-term. The decline is viewed as a correction within a longer-term upward trajectory, with a target of $5,900 per ounce by early 2027.
Regarding oil prices, one team believes Middle East conflicts pose short-term upside risks, but their base case expects prices to eventually revert to lower ranges, with a 3-month WTI forecast adjusted to $75 per barrel. Another institution has upgraded its view on global energy stocks to neutral, citing heightened supply risks.
Despite global market volatility, several foreign institutions express confidence in Chinese equities, with targeted allocations already in place. One wealth manager remains overweight China within Asia ex-Japan due to valuation re-rating potential, particularly in technology innovation aligned with AI development. Policy support is expected to continue under China's 2026 GDP growth target of 4.5–5.0%.
Another firm is optimistic about equities in mainland China, Hong Kong, Singapore, South Korea, and Japan, noting Asia's concentration of AI and tech leaders accelerating growth amid global trends and government support. In China, a "barbell strategy" focuses on innovative leaders and high-quality dividend stocks to capture structural growth while providing portfolio stability.
A third institution sees the current market adjustment as an opportunity to accumulate quality Chinese AI stocks at lower valuations. The sector's forward P/E of around 13x does not fully reflect benefits from AI investments and monetization over the past year. Policy remains supportive of AI and tech innovation, with earnings, valuations, and positioning expected to recover as sentiment and fundamentals improve.
One Canadian asset manager has made targeted adjustments to its global equity dividend strategy, increasing allocations to Asian stocks—including listings in mainland China, Hong Kong, Singapore, Taiwan, South Korea, and Indonesia—due to the region's recent underperformance and high-dividend characteristics. These holdings span tech, consumer, and financial sectors, with potential for further exposure increases.
Another asset manager notes that Middle East conflicts and energy crises have clouded global equity prospects, leading them to adjust equity allocations to benchmark levels in most markets—except China. Strong commodity reserves, ample alternative energy supplies, and policy support maintain their positive stance on Chinese stocks.
A strategist holds a positive view on A-shares, suggesting the "de-risking" phase may be nearing its end. Improving macro liquidity, incremental policies, tech innovation, and market reforms could drive mid-term valuation repairs. Another fund expresses confidence for 2026, anticipating earnings improvements as capacity growth in cyclical sectors falls below demand, alongside potential leaps in AI trends. They highlight opportunities in beaten-down sectors like consumer staples, healthcare, chemicals, defense, and new energy, where quality leaders may experience a "Davis double play" upon recovery.
Amid high volatility, foreign institutions emphasize defense, diversification, and relative value capture in asset allocation. One team remains overweight global equities, expecting strong earnings growth led by the U.S. and Asia ex-Japan. Another maintains a positive outlook on global and U.S. stocks across tech, communications, financials, and industrials, noting recent tech sell-offs may be healthy as investors diversify from concentrated positions, with valuations now more reasonable.
Views on fixed income diverge. One institution is underweight fixed income, particularly developed market government bonds, but favors emerging market dollar and local currency debt due to strong fiscal balances and attractive relative value. They are slightly overweight high-yield bonds and hold investment-grade corporate bonds as core positions amid wider spreads.
Another team sees ongoing value in bonds, preferring investment-grade and emerging market debt over high-yield given narrow credit spreads. They favor medium-to-long duration euro and pound investment-grade bonds and maintain a positive view on medium-duration dollar quality bonds.
One manager has actively adjusted its portfolio structure, reducing financial sector exposure in value stocks over concerns about private credit markets, AI's impact on credit cycles, and potential policy shifts from regional conflicts. They increased defensive allocations to healthcare, consumer staples, and utilities, while raising energy exposure. In income stocks, they added oil-related securities and defensive utility holdings for balance.
Multiple institutions stress the importance of diversification beyond traditional assets. One team highlights gold and alternatives as increasingly vital in volatile markets. Another notes prolonged geopolitical events heighten vulnerability in stock-bond portfolios, weakening traditional diversification. They recommend short-term hedges via USD longs and oil/commodities, with gold and short-duration quality bonds offering mid-term value if economic slowdown and rate cut expectations rise.
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