MARKET INSIGHT – March 2026

MARKET INSIGHT

Prime Partners’ monthly analysis of global economic and financial market news.

Iran, artificial intelligence, and a few cockroaches…

The pace of events impacting financial markets seems to have accelerated sharply in recent quarters. Of course, President Trump’s “style” and the methods of the US administration are contributing significantly to this development. What is more, this coincides with one of the greatest technological revolutions in history, which by its very nature adds an abrupt and constantly changing dimension to investors’ reactions and makes market sentiment more unpredictable.

In no particular order, February was marked by the launch of a joint military operation by Israel and the United States in Iran, which, at the time of writing, has resulted in the death of Iran’s long-standing leader Ali Khamenei and several members of his inner circle. It is too early to determine how the situation in the region will evolve and what the medium-term repercussions of the ongoing events will be. Meanwhile, artificial intelligence continues its forward march, both exciting investors and making them uneasy about its ability to cannibalize entire segments of the economy. Finally, to borrow the now-famous analogy of Jamie Dimon, CEO of JP Morgan, the “cockroaches” occasionally spotted among private credit players continue to cause concern.

“There is nothing negative about change, if it is in the right direction.” This quote is sometimes attributed, like many others, to Winston Churchill or the American writer Jim Rohn. Beyond its common sense, it sums up the current challenge for financial markets in determining if the many changes underway, whether geopolitical or technological, are moving in the right direction.

As we know, in recent months on the artificial intelligence front, the era of blissful admiration for technological prowess has given way to pragmatism and, it must be admitted, to certain fears, whether justified or not. Market participants continue to reassess the case of the well-known hyperscalers (Microsoft, Alphabet, Meta and Amazon), whose massive investments in the race for artificial intelligence, particularly in the infrastructure it requires, have durably altered their financial profiles. Business models remain as robust as ever and show no signs of slowing down, but debt levels have surged, reflecting the scale of the investment phase that the tech sector is currently undergoing.

The era of blissful admiration for technological prowess has given way to pragmatism and, it must be admitted, to certain fears, whether justified or not

On the other side of these massive capital flows are, quite logically, companies with bulging order books. Whether in certain subsegments of the vast semiconductor sector or in other fields related to the construction, maintenance, or energy supply of data centers, various companies are seeing their activity accelerate sharply. It is hardly an exaggeration to speak of a “golden age” for certain industries, particularly those supplying components and services related to data centers.

In light of these factors, it is not surprising to witness the current sector rotations and investors’ enthusiasm for specific technology subsegments, illustrated among other things by the surge in the South Korean equity index (up nearly 50% since the beginning of the year), whose two heavyweights, Samsung and SK Hynix, are identified as direct beneficiaries of the enormous infrastructure needs associated with artificial intelligence.

The pragmatism now displayed by investors can also cause damage in sectors where AI is, at this stage, perceived more as a threat than as a technological boon capable of boosting companies’ productivity and margins. February saw various analyses and statements on the subject, notably from Anthropic, a direct competitor of OpenAI, regarding the ability of its AI agents to perform certain tasks traditionally reserved for cybersecurity providers or even financial services firms.

The stock market rout already experienced by many software publishers in January therefore appears likely to extend further. This phenomenon, which has to do with the transformation of entire segments of the economy and the long-term viability of the players operating within them, is expected to continue until investors are better able to distinguish winners from losers — even if this temporarily results in market excesses.

Amid the busy news cycle of the past month, it also seems important to mention the growing doubts surrounding the actual state of the private credit industry — or at least some of its actors. After years of strong expansion, the first problems appeared a few months ago. The lighter regulation of this segment of the credit market, along with a certain lack of transparency, raises concerns that the recent “accidents” (the bankruptcies of Tricolor and First Brands in 2025) may not be isolated events, but rather the first signs of major difficulties ahead for the entire sector, whose ramifications for the traditional financial system are difficult to assess.

This has been compounded by significant media coverage, particularly in connection with the (partial) use of this type of financing by several major AI players. The recent difficulties faced by one of Blue Owl Capital’s funds — whose partnership with Meta was widely discussed last year — have reinforced market mistrust, raising the specter of massive withdrawals by investors holding stakes in private credit funds. Unsurprisingly, the shares of major industry names such as Blackstone, KKR, Apollo and, of course, Blue Owl fell by around twenty percent in February.

The heavy news flow over the past month, mainly from the other side of the Atlantic, does not make us forget about Europe or emerging markets — far from it. For the Old Continent, February was a strong month in equity markets, with the Stoxx 600 index gaining more than 3.7% and extending its outperformance relative to its American counterpart. This result, however, is not due to a sudden surge in European growth, but rather to a sector composition that remains very different from that of the S&P 500. In other words, the European index is less affected by doubts about AI-related spending. Better still, Europe’s largest company by market capitalization, ASML, active in the semiconductor industry, is perceived as one of the major beneficiaries of the current massive wave of investment and is up more than 30% in 2026. This is complemented by the boom in numerous European energy stocks, particularly those related to renewables and electrification.

Emerging markets are performing best in 2026, particularly in Asia, which seems well positioned to take full advantage of AI-related

Finally, as already mentioned with the example of South Korea, emerging markets are performing best in 2026, particularly in Asia, which seems well positioned to take full advantage of AI-related investments, while appearing less exposed to the vagaries of the US administration and President Trump’s statements. Without generating spectacular stock market gains or showing a concrete rebound in economic activity, China now looks like it has weathered its most difficult period and is in a position to credibly take part in the AI race, primarily in certain segments such as robotics.

Our portfolios sailed through February smoothly, posting solid performance in line with January. The various issues discussed in this report do not prompt us to modify their composition. The current allocation, through the major asset classes held, is well suited to face current uncertainties and should once again demonstrate its ability to withstand a potential resurgence in volatility, whether driven by geopolitical or financial events. Our decision to maintain significant exposure to gold, to favor emerging market equities, and to invest in uncorrelated alternative strategies reinforces this conviction.

To return to the quote attributed to Churchill (or Jim Rohn), we believe it is more important to build portfolios that are adapted to change and capable of withstanding the often temporary market turbulence that accompanies it, rather than trying to determine ahead of everyone else whether the direction being taken is the right one. We will continue to prioritize adaptability in our management over uncertain predictions.