Sustainable Opportunities Funds: Q3 2026 and the benefits of diversification in action

2 minute read

impressive corporate earnings

The last three months have seen global stock markets edge higher against a largely negative news backdrop. Rising yields, the ongoing conflict in the Middle East and higher inflation are well-known headwinds for equities, but impressive corporate earnings and resilient economic data are outweighing these risks for now.

Performance has returned in our Balanced and Growth Funds with the funds ahead of their IA comparators over the last 3 months, 6 months, and1 year. The Balanced and Growth funds have returned 1.26% and 1.76% over 3 months, respectively.

Several factors have driven government bond yields to multi-year highs, mainly the Iran conflict and resultant rise in energy prices and growing concerns around the sustainability of government debt levels. Significantly higher expectations for central bank interest rates have not helped either. Markets currently imply the Bank of England raising rates from 3.75% to 4.75% by late 2027, whereas investors began the year expecting further rate reductions.

Although the macro backdrop has become more challenging for stocks, business performance has been impressive. However, it’s not just at the company level where performance has exceeded expectations as economic growth at a country level has proven surprisingly resilient. The UK was the fastest growing G7 economy in the first half of 2026, with GDP expanding by approximately 1.1%. Leading the G7 with GDP growth of 1.1% is indicative of the underwhelming performance of peers. Globally, economic growth has beaten forecasts, but this is more down to the bar being lowered due to significant expected headwinds rather than surging levels of economic activity.

It is shaping up to be another good year for stocks despite several headwinds. Brent crude oil rose 34.8% last quarter and while an oil price around US$100 a barrel is not positive for global economic growth, it is manageable and not especially prohibitive. In the near term, high levels of capex spending and fiscal stimulus are supporting stock markets and economies, but potential risks are posed by the longer-term sustainability of these drivers. US midterm elections are the main scheduled event for investors in the upcoming quarter, with the UK Budget expected to be more important for financial planning purposes than fund positioning.