Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.
“History doesn’t repeat itself, but it often rhymes.”
This quote, which is often attributed to Mark Twain, feels especially apposite at the moment. The media, both traditional and social, are full of attempts to compare the current conflict in the Middle East with previous wars and energy shocks.
Key questions over the past month before the ceasefire agreement included: are we heading for an oil price of $200 a barrel, a recession, stagflation or anywhere in between? Is this the Third Gulf War with the potential to escalate a great deal further or will it be over in less than another month? Would the conflict transform the politics of the Middle East and global supply chains?
It has been very difficult to see through the fog of war and answer these questions. Instead, we take a step back and look at the world through the vision of 3D. We believe the current conflict is part of a longer-term 3D challenge: Disruption, Dislocation and Decoupling. And we believe the solution for your clients will come through taking a 3D approach to portfolio management: Diversified, Disciplined and Differentiated.
We will start with the challenges. The days of geopolitical certainty epitomised in political consensus, globalisation and free trade have ended. It is now impossible to rule out potential trends or events because they are seen as outside of what is rational or possible; on the contrary, what was viewed as implausible is now actually often coming to pass.
Old political alliances are under strain or negotiation, and domestic politics have become polarised. This has been amply demonstrated by President Trump’s threat to leave NATO, Russia and Iran exchanging drones and intelligence, and the US allowing Russian oil to be sold again against the wishes of many of its allies. Alliances are becoming more complex and appear to be turning into shorter term marriages of convenience.
Part of this process is the fragmentation of globalisation, including the rise in tariffs that is putting pressure on free trade, as countries around the world are becoming ever-more insular. This is bringing new challenges at a time of an already changing economic landscape: inflation has ‘normalised’ at higher levels and interest rates have followed suit, while global growth remains under pressure. These trends could be exacerbated much further by an extended Middle East conflict.
Stock markets are contending with the end of US exceptionalism, market concentration, high valuations in some areas and rapid shifts caused by the relentless news cycle and huge flows into passive vehicles that are causing increased momentum and volatility in stock markets.
AI is bringing amazing possibilities but also great uncertainty. AI could dramatically change the employment, business and social environment and is already being attributed to partly causing the rise in youth unemployment. The first two months of 2026 were dominated by investors downgrading the share prices of companies that they believe will be losers from AI.
How can the 3D solution help clients to navigate the new environment, in which the world is evolving from the Exceptionalism Era to the Unexceptionalism Era? First, investors should look to take on the risks they believe they will be rewarded for and diversify away from the ones that will not. The Exceptionalism Era obscured the benefits of diversification due to the relative underperformance of value, smaller companies and non-US markets. Last year, however, showed that diversification across asset classes, geographies, sectors and investment styles can provide a risk management cushion and help returns.
Second, the differentiated approach to global equities today is to take an active view by assessing markets based on their fundamentals and long-term prospects rather than simply presuming that because the US led the way in the Exceptionalism Era it will continue to do so now.
Third, discipline in investing is important because we are generally poor predictors, especially when emotions are involved to cloud the decision. Having an investment process that relies less on estimates and more on consistency and patience can help reduce the impact of prediction. Some flexibility, however, will be needed as the global investment environment evolves.
Whether this time is different and whether or not we will see the rhyme of history in today’s events is yet to be determined. By remaining Diversified, Differentiated and Disciplined, however, the Liontrust Multi-Asset team believe that the challenges we face today and tomorrow will be navigable.
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KEY RISKS
Past performance does not predict future returns. You may get back less than you originally invested.
We recommend this fund is held long term (minimum period of 5 years). We recommend that you hold this fund as part of a diversified portfolio of investments.
The Funds and Model Portfolios managed by the Multi-Asset team may be exposed to the following risks:
- Credit Risk: There is a risk that an investment will fail to make required payments and this may reduce the income paid to the fund, or its capital value;
- Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss;
- Liquidity Risk: If underlying funds suspend or defer the payment of redemption proceeds, the Fund's ability to meet redemption requests may also be affected;
- Interest Rate Risk: Fluctuations in interest rates may affect the value of the Fund and your investment. Bonds are affected by changes in interest rates and their value and the income they generate can rise or fall as a result;
- Derivatives Risk: Some of the underlying funds may invest in derivatives, which can, in some circumstances, create wider fluctuations in their prices over time;
- Emerging Markets: The Fund may invest in less economically developed markets (emerging markets) which can involve greater risks than well developed economies;
- Currency Risk: The Fund invests in overseas markets and the value of the Fund may fall or rise as a result of changes in exchange rates;
- Index Tracking Risk: The performance of any passive funds used may not exactly track that of their Indices.
- ESG Risk: there may be limitations to the availability, completeness or accuracy of ESG information from third-party providers, or inconsistencies in the consideration of ESG factors across different third party data providers, given the evolving nature of ESG.
The risks detailed above are reflective of the full range of Funds managed by the Multi-Asset team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
DISCLAIMER
This material is issued by Liontrust Investment Partners LLP (2 Savoy Court, London WC2R 0EZ), authorised and regulated in the UK by the Financial Conduct Authority (FRN 518552) to undertake regulated investment business.
It should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets.
This information and analysis is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content, no representation or warranty is given, whether express or implied, by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified.
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID) and/or PRIIP/KID, which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.com or direct from Liontrust. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
