The positive return of the MSCI (Morgan Stanley Capital International) World Index belied all the geopolitical and macroeconomic turmoil that roiled through the 3rd quarter of 2026. The Middle East conflict dragged on, and oil prices swung between $67 to $107 barrel. The energy shock fed into expectations of higher inflation, which influenced the rise in interest rates in the US and other countries. Andy Burnham, the UK Prime minister, revealed a theory that Iran was behind a terror plot targeting the Royal Air Force Base Fairfield. Tensions flared between North and South Korea after three South Korean soldiers were injured by landmines in the Demilitarized Zone (DM). In late September, a Flydubai flight enroute to Tel Aviv, Israel made an emergency landing in Tabuk, Saudi Arabia after the Omani co-pilot stabbed his Emirati captain. Most of the passengers were Israeli citizens, and PM Netanyahu speculated the co-pilot had committed an act of terrorism.
Despite all the drama, the MSCI ACWI (All Country World) Index returned 1.69% for the quarter; and 13.37%, year to date (January 1 – September 30, 2026). The MSCI US index was up 2.32% for the quarter; and 12.63%, year to date. The MSCI ACWI ex-USA index was up .57% for the quarter; and 14.66%, year to date. Performance of countries within the various international regions varied considerably.
For instance, according to HSBC, concerns over weaker economic forecasts and deteriorating analyst expectations, led European equity funds to rotate out of France and into the UK. The UK index, the largest component of the MSCI’s AC Europe index, was up 1.90% for the quarter, while France, the next largest market, was down 5.43%. At the end of September, Switzerland’s Economic Sentiment Index dropped from 12.1 to 2.6 – MSCI’s Swiss index fell 5.64% for the quarter. On the other hand, the MSCI Ireland Index was up 10.04% led by strong performance of its financial and real estate components. For the quarter, the MSCI AC Europe index was down 1.37%, but it was still up 6.97% year to date.
There was great dispersion among Asian markets as well. Sluggish domestic demand, ineffective policy support and global inflation pressures were credited for the decline in MSCI’s China A Index (shares of mainland China-based companies that trade on domestic exchanges) of 11.08% for the quarter. On the other hand, structural reforms and strong earnings were credited with the 6.09% rise of the MSCI Japan index for the quarter. The MSCI AC Asia index was up 1.75% for the quarter; and 25.06%, year to date.
Elsewhere, the MSCI Canada Index was up 1.62% for the quarter led by resources stocks; it was up 9.44% year to date. Higher commodity prices also were credited for the rise in stocks in the MSCI EM Latin America index, which was up 4.03% for the quarter; and 15.22%, year to date.
In aggregate, international equities still appear to trade at attractive valuations, while, according to Goldman Sachs, earnings growth across Europe and Asia remains robust. To me, this underscores the case for maintaining an exposure to non-US equities.
Blackrock. however, noted that September was a more volatile environment for equities in general that “shifted the near-term strategy toward disciplined selection rather than broad-market optimism.” I believe disciplined security selection may remain an important consideration in the current market environment, although no investment strategy can guarantee positive results.
Disclaimer: This material is intended for educational purposes only. You should always consult a financial, tax, or legal professional familiar with your unique circumstances before making any financial decisions. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost. All statements made regarding companies, securities or other financial information contained in the article are strictly beliefs and points of view held by Bastion Fiduciary and are not endorsements of any company or security or recommendations to buy or sell any security.