KPMG pointed out that as 2026 began, global financial markets opened with optimism, underpinned by steady economic expansion and hopes for a measured reduction in borrowing costs. Yet by the end of March, a more complex and unpredictable backdrop had taken shape. KPMG also indicated in the research report that while major economies held relatively firm, the pace of cooling prices slowed noticeably.
KPMG also explained that surging energy costs, fueled by renewed geopolitical strains—especially the escalating conflict involving Iran, Israel, and the United States—prompted investors and policymakers alike to rethink the timing and scale of rate cuts.
Central banks responded with a measured, evidence-based approach, leaving markets to contend with the possibility of rates staying elevated for longer. This shift brought greater swings in asset prices and more selective investor behavior.
Although company profits continued to support valuations in certain areas, differences across industries and geographies grew wider, highlighting the need for careful scrutiny and strong analytical discipline. In credit markets, underlying conditions stayed largely steady, but yield spreads widened slightly to account for fresh risks.
With higher baseline rates still in place, demand for yield-generating investments remained robust, particularly in structured products where quality and structural safeguards drew the strongest interest. Across global equities, March delivered a spike in volatility.
KPMG further noted in the research report that European shares moved mostly flat amid softer industrial activity and external headwinds, while U.S. indices proved more resilient, driven largely by big technology names—though overall market participation narrowed.
Defensive sectors, energy, and firms with solid balance sheets attracted growing allocations as caution increased.
The S&P 500 fell 5.09 percent to close at 6,529 points, and the NASDAQ dropped 4.75 percent to 21,591 points.
In fixed income markets, government bond yields climbed as inflation expectations rose. U.S. 10-year Treasury yields increased by 36 basis points to finish at 4.32 percent.
Credit spreads edged wider, especially for lower-rated debt. European government yields followed a similar upward path.
Currency markets reflected these dynamics: the U.S. dollar gained ground as rate-cut expectations were pushed back, while the euro settled at 1.1554 against the dollar, down 2.20 percent for the month.
Commodity prices told a dramatic story.
KPMG also pointed out that oil markets surged on supply worries tied to Middle East tensions. Brent crude reached $118.35 per barrel, up 63.29 percent in March, while WTI climbed 51.27 percent to $101.38. Gold held steady as a safe-haven asset, and industrial metals showed mixed results amid uncertain demand.
The collateralised loan obligation (CLO) sector displayed resilience despite heightened caution.
European issuance continued, supported mainly by refinancing, though new deals slowed as spreads widened. Ireland retained its position as the preferred location for structuring these vehicles, with strong appetite for senior tranches.
In the United States, new issuance moderated modestly but benefited from stable loan fundamentals and demand for floating-rate assets. Geopolitical developments pushed European AAA spreads more than 170 basis points wider over three-month Euribor.
Leveraged loan default rates rose to 5.1 percent in the US and 3.1 percent in Europe, lifting constant default rates above long-term averages.
KPMG also stated that new-money leveraged-loan volume in March totaled $86.25 billion, representing 25.92 percent of the quarter’s $332.70 billion total.
Regulatory attention stayed sharp on valuation clarity, liquidity management, and pricing consistency.
European authorities continued refining rules around stress testing and governance, especially for less-traded assets, while emphasising tighter controls amid market swings.
The International Monetary Fund’s April 2026 outlook points to a modest easing in global growth through the year, as tighter financial conditions and softer demand weigh on activity despite ongoing technology investment.
For the United States, GDP growth is projected at 2.3 percent in 2026 (from 2.1 percent in 2025), with inflation climbing to 4.4 percent and unemployment edging to around 4.6 percent.
In the European Union, GDP is expected to slow to 1.1 percent (from 1.4 percent), inflation to ease slightly to 2.3 percent, and unemployment to hover near 6.1 percent. KPMG added that Ireland continues to draw support from exports and investment, though at a gentler pace.
KPMG concluded in the research reprot that the first quarter of 2026 served as a reminder that while fundamentals remain intact, vigilance and adaptability will be essential in an environment shaped by economic / geopolitical friction and shifting policy expectations.