An interview with:
Daniel Babington
Portfolio Manager at TAM Asset Management (TAM)
Daniel joined in TAM in 2020 after graduating with first-class honours in Economics. Recognised as a 2024 Citywire Top 30 Under 30 and multi-award finalist, Daniel combines expertise and passion to deliver impactful sustainable investment strategies, addressing global challenges while driving financial returns for investors.
About TAM
Part of the Amber River Group, TAM is an award-winning discretionary fund manager (DFM) with over 16 years’ active investing and fund research experience. They have developed a diverse range of model portfolios for clients, including active, passive, sustainability-focused and Sharia-compliant investment strategies.
Global markets faced a challenging third quarter (Q3), with low returns across most major regions and losses in some markets.
The three months between July and September were marked by geopolitical and macroeconomic uncertainty, as the Middle East conflict pushed energy prices higher and the US introduced a new wave of trade tariffs.
Despite the slower quarter, markets have continued to deliver strong returns overall in 2026, which highlights the value of focusing on long-term trends rather than short-term movements.
What happened in the markets in Q3 2026?
Geopolitical and macroeconomic tensions were the main drivers of market movements during Q3. Several indices posted losses, while others saw small gains.
The UK market performed relatively well. The FTSE All-Share returned 2.4% during the quarter, putting it behind only Japan’s TOPIX, which returned 3.8%. The FTSE remains the weakest-performing major market in 2026 but has still delivered a positive return of 9.8% throughout the year.
The US market also continued to grow, with the S&P 500 returning 2.3%. US equities were supported by strong company earnings and continued investment in AI, although rising interest rates and concerns about the valuations of some technology companies caused volatility.
European markets had a more difficult quarter. The MSCI Europe Index fell by 1.3%, as investors became more cautious about the impact of higher interest rates and energy prices. However, the region remains positive year-to-date.
Asian markets ex-Japan and emerging markets were also broadly flat, with MSCI Asia ex-Japan and MSCI Emerging Markets both falling by 0.2%. However, both remain strong year-to-date and continue to be the standout performers of 2026 so far.
“The FTSE All-Share returned 2.4% during the quarter, putting it behind only Japan’s TOPIX, which returned 3.8%.”
Inflation remained above target in many regions, but economic growth was stronger
Inflation remained above the 2% target in most major economies during Q3, with higher energy prices being a key factor. The Middle East conflict has affected inflation because disruption to energy supplies can push up oil and gas prices, and these effects are felt around the world.
In the UK, inflation rose to 3.1% in August. The Bank of England kept interest rates at 3.75% in September but warned that inflation could rise further as a result of higher energy prices and continued uncertainty in the Middle East.
In Europe, inflation reached 3.8% in August, its highest level since September 2023. In response, the European Central Bank raised its key interest rates from 2.4% to 2.65% at its September meeting – its second hike since the conflict began.
Meanwhile, US inflation was at 3.4% in August. Inflation has been above the 2% target since the pandemic, which led the Federal Reserve to raise interest rates at its September meeting to 3.75% – 4%, up from 3.5% – 3.75%, marking the first increase in more than three years.
Despite these inflationary pressures, economic growth readings were relatively encouraging.
The UK economy grew by 0.5% in Q2, after the figure was revised upwards from 0.4%. The eurozone economy grew by 0.6% during the same period, its strongest growth since 2022.
The US economy also continued to perform strongly, growing by 2.2% in Q2. The resilience of the US economy has provided some support for global markets, despite continued uncertainty around inflation and interest rates.
The case for long-term investing and portfolio diversification
While Q3 was a slower period for markets, zooming out offers a different picture.
You have to go back to 2022 to find a year when any major world market recorded an annual loss, while 2018 was the last year losses were seen across all major markets.
This highlights why it is important not to focus too heavily on short-term market movements. Markets will always experience periods of volatility, but investing is about building wealth over the longer term.
The different returns across regions during Q3 also emphasise the importance of diversification. For example, investments in Japan’s TOPIX rose by more than 3%, while European markets fell by more than 1%.
Spreading your investments across different regions, sectors, and asset classes can help reduce the impact of poor performance in any one area. It also opens you up to more opportunities in markets that are performing well.
“US equities were supported by strong company earnings and continued investment in AI, although rising interest rates and concerns about the valuations of some technology companies caused volatility.”
Looking ahead
As we move into the latter stages of 2026, there are a few key events and themes to keep an eye on:
- The UK Budget and its impact on markets
- The US midterm elections
- Inflation and interest rates
- Oil prices and developments in the Middle East
- Investor confidence in AI-related companies
Key takeaways
Markets had a challenging Q3, but the UK performed relatively well, and every major global index has delivered positive returns so far this year.
Inflation remained high in most regions, but economic growth was positive.
The quarter is another reminder of the importance of taking a long-term approach to investing. Short-term market movements are difficult to predict, but maintaining a well-diversified portfolio and staying focused on your long-term goals can help you weather periods of uncertainty.
Get in touch
If you have any questions about your financial plan or how the markets may affect it, please get in touch with your Amber River adviser.
To set up an initial appointment with an Amber River financial planner, 0800 915 0000. Alternatively, you can use our contact form to arrange an appointment.
Please note
We’ve written this article purely for general educational purposes. It’s not investment advice, or an invitation or inducement for you to invest your money. Your situation will be unique to you, and that’s why you should always seek personalised advice from a qualified financial adviser before taking any action.
This is important:
We’ve written this article purely for general educational purposes. It’s not investment advice, or an invitation or inducement for you to invest your money. The information in the article can go out of date over time too – thanks to law and tax rule changes.
Your situation will be unique to you, and that’s why you should always seek personalised advice from a qualified financial adviser before taking any action.
