Market outlooks

Hello and welcome to the multi-asset webinar on the 1st of April, 2026. My name is Lucy Dean and I sit within the wealth team covering the North of the UK. I'm joined today by Trevor Greetham, the head of our multi-asset team, and Melanie Baker, our senior economist. Today's session will cover recent events, their impacts on markets, and why diversification has never been more relevant.

We'll have a chance to answer questions at the end, so please send them through the portal. And with that, I will hand over to Melanie.

Thanks, Lucy. Alright. So, look, I don't know what's going to happen here any more than anyone else, but the economic effect will be worse the longer the conflict continues.

Do you think that, like, brief spikes in energy prices can leave very little mark on the global economy, more prolonged spikes and things get more damaging. And at the outset, I just want to point out that this crisis is already about more than just oil and gas prices. They know the disruption to trade routes is causing issues for the supply of all sorts of commodities.

And for me, things like the impact on fertiliser costs and availability is a particular concern, meaning essentially higher food prices down the line on top of any impact already had on that sector from higher energy and transport costs. So, big picture: energy shocks lead to higher inflation and lower growth. What happens to interest rates is a little less straightforward.

Right this first chart just gives a crude indication of where you might expect the energy components of CPI to go if oil and gas prices stay where they are. So, in this case, it's a very crude exercise that suggests energy inflation would move from slightly negative to perhaps 20% year on year. And, you know, with weights in the inflation basket of 5% to 10% in different economies — major economies.

Then you're looking at a crude approximation of an inflation impact of 1% to 2% higher. That shouldn't be much of a surprise if we get there. Another reasonable place to start, I think, are rules of thumb. So we can look at some of the scenario analysis and research done by central banks and other institutions on the impact of higher oil and gas prices on output growth.

So GDP and inflation and, you know, again, rising energy commodity prices look set to harm economic growth and drive up inflation at a global level. So the IMF have noted that a sustained 10% rise in oil prices could boost inflation by perhaps 0.4 percentage points. So a 10% rise in oil prices, would boost inflation by 0.4 percentage points and lower global growth by a tenth to two-tenths.

So if you kind of extrapolate that to the size of the recent increase in prices, then you're looking at maybe inflation boosted by perhaps two percentage points and GDP hit by maybe half a percentage point to 1%. Global growth overall is only about 3%, so that's the run rate. So, yes, it could be a significant hit and enough to take you perhaps to at least a threshold of recession.

So maybe focusing more on the US, Euro area, the UK. First of all, you might expect a little bit more of a modest impact on the US economy because the US is, of course, a substantial oil producer. We looked at some Fed research which suggests, perhaps on the current level of oil prices, more like a 0.8% rise in inflation.

And perhaps a 0.2 percentage point hit to GDP, So a bit lower than those initial estimates. On the Euro area, you'd expect maybe a bigger impact because they're a major oil and gas importer. And again, we looked at some ECB analysis. Maybe then you're looking at more like a 1.5 percentage point hit on higher inflation and three-tenths lower GDP growth.

So, at least these are reasonable starting assumptions. For the UK, then you might get slightly bigger effects again. And perhaps the shock to date could be more like two and a half percentage points higher inflation and half a percentage point hit to GDP. Actually, even in the UK, that's not obviously quite enough to kind of plunge you into recession

but again, you can sort of skirt the edges there — at least a sort of technical recession even with those impacts. But you want to be really careful with any of these sorts of models and impacts. The different approaches are available, other estimates are available, other models, clearly. And I think the other point is, again, coming back to those initial points — if the conflict suddenly calms down, these are going to be overestimates.

On the other hand, with strains being seen in refined products and other things, the impact could end up larger. And clearly the impact also depends on how governments and central banks respond to this Energy crisis — it's a really important aspect. Government subsidies, as we've seen already, for example, in Japan, could soften the impact on consumers.

And if this conflict continues, it wouldn't be surprising at all to see more temporary subsidies, tax cuts, other support programmes to at least support the most vulnerable consumers. Okay, but what about central banks and prospects for rate hikes? So we've now had at least inflation data for March from the Euro area. So here on the right-hand side chart, you can see that local headline CPI line in purple already starting to come up.

And that reflects the initial jump in energy inflation. That's just really the petrol and diesel price impact. I'm sure you've all noticed prices rising quickly at the pump, already very responsive to oil price changes. What central banks will be particularly alert to in coming months is all those other lines — signs of increases in core inflation, services inflation, pay growth, inflation expectations.

It's passing through more broadly. Okay, let's think quickly about the different central banks. I'll put Japan to one side. Before the conflict, I was expecting them to kind of raise rates gradually; I'm still pretty much expecting them to raise rates gradually. Coming into the conflict on the Fed side, the US Fed was expected to cut rates two to three times this year.

The Bank of England were expected to cut rates twice this year. The ECB was broadly expected to keep rates on hold. Now you look at things — markets and price hikes from the ECB and the Bank of England were no longer pricing in cuts for the US. I mean, think about Europe first. I don't think it would be very surprising if we saw what I would call insurance hikes in Europe — by which I mean one to two rate hikes designed to reduce the chance that we get stuck in a kind of higher inflation norm.

All those other lines and that kind of chart going up significantly. I think it's easy to see why central banks worry about inflation persistence — that period of high inflation that we put up with during the pandemic. You can see on the charts there — it's a really fresh memory for us all. And given the price level hasn't fallen back, things still feel much more expensive than they used to.

Then against that backdrop, there are risks that firms just find it easier to pass on higher costs to consumers than pre-pandemic. And so inflation expectations are at risk of rising. And even wage growth in this context —employees may perhaps now be expected to be compensated for cost of living shocks to at least a greater degree than they were pre-pandemic.

So to contain those risks, it makes sense for inflation-targeting central banks to at least consider precautionary insurance rate rises if energy costs don't fall back. In the Bank of England's case, inflation dynamics were stronger — for example in the Euro area, you can see that on the chart — going into this crisis, and worries about inflation persistence were already pretty prominent.

What about the Fed rate hikes? Look, rate hikes at least look less likely in response to this energy shock than they do in Europe. The Fed's dual mandate does put them in a bit of a different position. But even the Fed was already alert to upside inflation risks. And in comments this week, Powell said that the Fed is inclined to look past the energy price shock.

But five years of above-target inflation means that they can't take for granted that inflation expectations won't rise. But for now, the Fed's messaging has been pointing more towards delayed cuts, than hikes. A slide here shows the PMI business surveys which we do have for March. The right-hand side chart there is the PMI business survey indicator for output prices.

So reflecting that businesses are increasingly saying they'll have to raise prices. So you're back in that case for insurance rate hikes again. On the left-hand side, you can already see a general worsening there in the activity indicator. And in the middle you can see the one for employment has deteriorated too. In particular, look at the UK — it was already really quite weak, standing out against other economies.

It's got a little bit weaker. More generally, that is the danger I think — that policymakers focus on fighting the last battle. So again, fresh in their minds is going to be 2022. Inflation rose a lot; sharp rate rises followed. But maybe tightening policy now would reduce the risks of that scenario.

But again, economies like the UK that haven't been growing very much, sitting with soft labour markets, maybe means they're going to have to cut rates. I think rate cuts would look more likely down the line. With that, I'll happily hand over to Trevor.

Great, okay. So I'm going to put this in a bit of longer-term context, but then I'm going to come back to how you might want to think about the various scenarios over the next few weeks as well. So, 'Spikeflation' and the Iran War. If you look at the chart on the left-hand side of your screen — where Mel's charts were for the last five years — this is the last 110 years.

Okay. So slightly more long-term context here. That left-hand chart shows you in purple, US RPI retail price inflation back to 1915. And what I've done there is I've shaded in those vertical grey bars — periods of high inflation. And that turquoise line is the price level. So, you can see sometimes it's rising gradually, as we saw from sort of 1980 to the time of the pandemic.

And sometimes it's rising more steeply, as we saw in the 1970s, as we saw around World War Two and as we saw during World War One. And you can see I've also shaded in the period from the pandemic onwards, and you can see that steeper rise in the price level that we're seeing. So, the point to make about that left-hand chart — certainly in the UK historical record...

In the US — I've looked at Ireland, I've looked at Germany — the major developed economies: high inflation is almost always spiky inflation. When inflation is high it's unpredictable. You don't get 7% followed by 7% followed by 7%. You get 20% followed by 1%, followed by 2%, followed by 15%. And what that's really saying is that high inflation historically has come in the form of price level shocks.

On the right-hand side of the screen, you've got a list of different factors we've been talking about really since the pandemic onwards, of why we think we've moved from a low, stable inflation paradigm to a spiky inflation paradigm. And it starts with the Covid stimulus in the pandemic. So number one on the dial there at the top left — we had wartime levels of fiscal and monetary stimulus.

In a supply-constrained economy, the stimulus was left in place as the economy was reopening, and that resulted in the old-fashioned too much money chasing too few goods, and you got prices rising very rapidly. That played into number two, which is chronic commodity underinvestment. I've been a commodity investor in multi-asset funds for more than 20 years. Most of that time you had excess capacity bearing down on prices and things like the discovery of US shale.

But recently you've had a period of underinvestment, really since the financial crisis, and the fossil fuel underinvestment has been increased by the transition to net zero. So you've had this period of basically tight commodity supply. That means that when you get a demand shock or an interruption to supply, prices in commodity markets can move very rapidly higher.

Then we move on to de-globalisation. That can include everything from Brexit to the breakdown of NAFTA to the tariffs which we're seeing at 1930s levels from America — on-shoring and production capacity, breakdown of trading relations with China as it became a bigger economic and geopolitical power. But we see that all the time: de-globalisation. We've got structural changes to labour markets, which is a bit of a catch-all.

Some of that's demographics — an ageing population. Some of it is actual deportations or threats of deportation in America, which tightens the labour markets, particularly in agriculture and hospitality. You've got massive public spending programmes of all kinds and populism, which makes it really hard to do any kind of austerity or spending cuts. You've got the heightened geopolitical risk, which obviously was part of the spike in inflation in 2022 with the invasion of Ukraine.

And you've got above all of this — and I think probably the most important one — high levels of debt and financial repression. When you've got high levels of debt, both sovereign and private sector debt, it becomes very difficult for central banks to raise interest rates to fight inflation. There's a temptation to let it rip. It's always accidental. We've got inflation targets.

They'll say sorry afterwards, but you can already see it in the debates in central banks: should they raise interest rates now to fight inflation? Or are they worried that everything's so fragile because of high levels of debt — that they should be cutting interest rates. You can already see that debate coming through. In some ways we're back to the 1970s.

So what we're seeing here is oil price shocks. And although people don't put it this way, I'm going to explain it on this slide — how even the Covid pandemic was actually an oil price shock. On the left-hand side, I've got a couple of charts that have been doing the rounds recently. They're a little bit provocative.

On the left-hand side, you can see, first of all, US CPI and then next to it, you've got UK CPI or RPI in the '70s. And what I've done is I've taken the two inflation spikes in the 1970s period of 'Spikeflation', shown in purple. And I've shifted the dates on the recent inflation spike from Covid, which is shown there in turquoise.

So it lines up with '73/'74 and, kind of roundabout, now they would be the second big inflation spike of the 1970s. Now, in the '70s, both of the inflation shocks were oil shocks. You can see in the table there the oil price at the start and the high in the Yom Kippur War. So in August '72, oil was $2.59 a barrel.

It ended up being $11.65 — it went up 4.5-fold. The Iranian Revolution in 1979 that was another big oil shock. Oil started at $12.80, ended at $41 — it tripled. Look at Covid, Ukraine, and this. You have to scratch your head here and check this is actually right. But in Covid/Ukraine it was a bigger oil shock in percentage terms, because during the lockdown oil dipped down to $20 for spot deliveries.

The futures markets at that time actually were trading at negative prices. So there was no spare capacity in terms of storage. And if you were taking delivery of oil, it was very expensive to find somewhere to put it. So you got to $20 a barrel. And then after the invasion of Ukraine, you were at $120 — so it went up six-fold.

Another energy shock. And then we've got this Iran War. We started at about $60 in December; the highest in futures trading for Brent was $118. So that's a doubling so far. Not on the scale of Yom Kippur, the Iranian Revolution, or Covid/Ukraine. But you can certainly see that pattern developing — that this could turn out to be a bigger energy shock.

And we know that the physical markets are trading at much higher prices than these futures markets — the futures markets, because they're the future expectation, are sort of slightly assuming that things don't stay this bad. But if you're trying to take spot deliveries, we've seen prices of $150 or higher.

Inflation spikes are painful for balanced funds. So this diagram looks at a big sweep of history here — looks at the last 100 years or so. On the left-hand side, it looks at the returns from US stocks and bonds. If you're in the bottom left-hand corner, you've got falling stock and bond prices, which happened in 2022.

And on that basis, it looks like it's quite a rarity. Only four times have stocks and bonds in America fallen at the same time as each other in a calendar year. But if you adjust those dots for inflation — look at real returns — there are many times when stocks and bonds fall in real terms. And if you look at the dates, you've got the Yom Kippur War in there, you've got the Iranian Revolution in there, you've got Covid in there. Periods when you get an inflation spike are bad for bonds — kind of obviously — but they're also typically very bad for stocks, especially if there's a recession.

And commodities are going up. So when we look at multi-asset portfolios — either the governed range or our GMAP funds — I'm comparing here the growth portfolio to a sort of typical passive balanced fund. On the left-hand side, you can see a 60/40 fund with really big exposures to US equities, which are quite inflation-sensitive, and to bonds. Whereas our  portfolio's got a bit of balance with more in the UK — a more inflation-resilient, cheaper market.

We've got commercial property, which again is a long-term real asset. And we've got a hedge with commodities. So your first line of defence in this kind of shock is diversification including inflation hedges. That will help protect value in times when a 'Spikeflation' shock hits you. The second line of defence is to be tactical. And this is where the business cycle comes in.

And there's great uncertainty at the moment. We have a daily tactical meeting — we've just come out of it. We're all — as is everyone else — reading the latest pronouncements from the White House and from the Iranians and from the Israelis and trying to figure out what's going on before the shock happens. The investment clock that guides our asset allocation was in the top left-hand corner.

That yellow dot. You see the trail over the last 12 months or so — we were in the top left-hand corner, which is recovery and growth but inflation generally falling. We started the year thinking, actually, the earnings outlook was quite good because the economies were chugging along quite nicely. There were some improvements in business confidence, and central banks felt able to cut interest rates further.

There was lots of speculation about Fed rate cuts. Where are we going next? It's more uncertain, and you can see a bit of a projection there with the inflation rise taking you into overheat. If you've got a recession as well, we go into stagflation. So lots of debate about where we head next. Two scenarios for you.

With parallels again with history. One is Russia/Ukraine 2022 and the other is the Gulf War. When people are talking about three scenarios — just to be clear here — you can split these into as many as you like. But one of them is there's a deal, and it's possible. And if there is a deal and the war ends and you get, I guess, security guarantees for Iran that they believe, they're asking to keep their civil nuclear programme.

They're asking to keep defensive missiles — whatever defensive missiles are. And if the Americans get what they want — the Strait of Hormuz is reopened — and all the things that Iran has said don’t happen, then the markets clearly rally, oil prices go down. It's definitely possible. But it does feel a little bit at the moment that the two sides are very far apart.

And I think it's unlikely that there is a deal. So I'll leave you with two scenarios. One of them is the 'Trump goes home' scenario, which is being talked about. We don't need the oil from the Strait of Hormuz — Trump here is pretending oil is not a global market with global pricing.

Because if the Strait of Hormuz is messed up, it's going to continue to affect gasoline prices in America. But there is that scenario where Trump goes home — some kind of spectacular event, an attack — this weekend, and he says, "That's it, we're out of there. You clear it up." I think in that case, you might not get the oil price moving a lot higher, but you might not get it moving a lot lower either.

You continue to have disruptions and uncertainty. And what you can see on the left-hand graph there is 2022: the turquoise line is the oil price. And the oil price went up and it stayed high for about three or four months. And during that time, of course, it was inflationary. And stock markets shown in purple were declining. So I think you have that possible scenario, or you have something a bit more extreme where ground troops are involved, and that's more like the first Gulf War in 1990.

And stock markets dropped when Saddam Hussein invaded Kuwait in August of 1990, pretty much out of the blue. And you could argue the US-Israeli attack on Iran was pretty much out of the blue — we weren't talking about it three months ago — and then the markets only really recovered when the oil price came back down again, when the war was over. We could be going into something a bit more prolonged like that, where there's lots of volatility in both directions.

But generally markets remain depressed until it's clear that the war is over. The problem we have at the moment is we don't see as clear an ending to this as you had in 1990. There was a United Nations resolution. There was a United Nations coalition. And when Saddam Hussein was back over the border from Kuwait, back in Iraq, the war was called off.

We don't see that same kind of clear ending at the moment, but those are the sorts of scenarios we're talking about. In that scenario where ground troops go in, there's more collateral damage, more lashing out by the Iranian regime at energy infrastructure — possibly a much bigger spike in oil prices. Then you worry a little bit about whether you get a recession.

So if you look historically at these oil shocks — this is the oil price in real terms — you've got here again the '70s: Yom Kippur War, Iranian Revolution; you've got the 1990 Gulf War, the Iraq War; you've got the QE and China bubble, Ukraine invasion, and Iran. All of those — one, two, three, four, five, six prior oil shocks — five of them were recessions.

The only one that wasn't was the Covid reopening. And arguably that was quite a special case in terms of where cash balances were. I'm going to stop there — we've had quite a few questions coming through. We are going to answer some questions.

Yes, perfect. Thanks so much, Melanie and Trevor. The first question we will ask here is: do you think the Bank of England still need to continue to reduce rates to protect the economy, rather than talking about holding or raising?

Yes. In short, I think pre-crisis, I was expecting the Bank of England to cut rates a bit further. And once they are a bit less worried about inflation persistence risks, I think we'll come back to that. Interesting that the question is worded in terms of — or are you thinking about does the bank think need to sort of talk about holding or, or raising rates?

Do they think interest rates talk about that? It doesn't mean you can get markets to do some of the work for you. So you actually need to do less.

Perfect.

Yes. I mean, I sort of joke that central banks have got inflation targets, but they don't use them during price level shocks because it's so painful to create the recession to reverse the increase in prices. So I say it's like dieting between meals. So, the UK inflation level should be up, what, 12% since the pandemic, but it's up 30%.

And my worry is, if there is a big inflation shock again, central banks will give lip service to fighting inflation but they will have to think about the economy as well. And that's where you need to get protection against cost of living increases through things like commodities.

Great. And still looking at the government side of things, do you think that, with government debts high, will they bring in capital controls in the UK or around the world?

Melanie Baker

No, that doesn’t seem likely to me. But look, that said, there are things governments can do — for example, from a regulatory perspective perhaps — that can encourage people to hold government debt.

Melanie Baker

So there are other forms of it — generally what we call financial repression — that can be engaged in if they really want to go down that path. But that's not really my central case.

Perfect. And which scenario are you most planning for — 'Trump goes home' or 'troops on the ground'?

I always think you've got to hold more than one scenario in our heads at a time, right? I think we're looking really at what Trump is doing, not what he's saying. And what he's saying is partly trying to keep markets as positive as possible while they're trading. I think over the long weekend we're going to see some kind of military action.

So I think we're positioned slightly short risk. So we're slightly short commodities — short equities rather, but long commodities. We were very short government bonds at the start of the year; we're now neutral. So we think government bond yields have risen so much that in a kind of 'Trump goes home' scenario, bond yields probably drop a bit; in a 'Trump goes in hard' scenario...

...there's a recession and bond yields probably drop. So we're neutral bonds at the moment. But slightly overweight commodities, underweight stocks — which I suppose is probably somewhere between 'Trump goes home but leaves things messed up' and 'Trump goes in hard and it takes weeks'.

Perfect. And to what extent could geopolitical risk in West Asia drive structural shifts in equity markets? And does this strengthen the case for investing in global funds like the MSCI?

Yes, okay. Well, I think there are structural changes happening. I do think that when this war ends, people will then look back at the US policymaking, and they'll think about the US midterm elections in November. And I think personally it'll be a flight away from the dollar again, which means gold goes stronger. If the dollar's weak, it generally helps emerging markets.

And I think there's a general theme which I believe in — which people are calling the DM-ification of emerging markets and the EM-ification of developed markets. So America's behaving more like an emerging market; emerging markets are in better shape. I think there is a shift towards the EM.

Perfect. And how exposed do you think the markets are to repricing of front-end rate expectations, if cuts are delayed further?

If cuts are delayed further? I mean, I think the question at the moment is will there be hikes, really. So I think a lot of that is now factored in. Obviously, I suppose, in that middle scenario — or the first scenario — the 'Trump goes home but leaves Hormuz mostly messed up' — that's the scenario probably with the most upside for bond yields, because it's inflationary but without an obvious end to it. But I think we're pretty neutral in terms of pricing. We think it's about right.

Perfect. And last question here: how vulnerable are equity valuations if rates stay higher for longer, particularly in parts of the market where earnings expectations remain ambitious — i.e. US tech?

Yes, right. So if we weren't talking about Iran we'd be talking about AI. The US stock market is trading on 40 times its cycle-adjusted earnings. The UK is on 20 times — so the UK is cheaper. It's the buy-one-get-one-free stock market. American equities are vulnerable just because they're expensive. And if at the same time you've got question marks about policy and you've got higher-for-longer interest rates, I think that makes them more vulnerable.

I've often been saying that feels a little bit like in the short term there could be dot-com bubble kind of dynamics around AI — in other words, the internet's a great thing, it's still all around us, but the stocks get too expensive. But I couldn't see what would burst the bubble. You needed higher rates, and this is what could give you higher rates.

So yes, I'd be a little bit nervous about US equities. And we saw the software companies getting hammered even before the Iran War came through. So a little bit nervous about the US generally.

Perfect. Well, thank you so much, Trevor and Melanie. We should wrap up there — keeping to 30 minutes. If we didn't get to your questions today, one of our sales team that you can see on the screen, reach out. Any other queries or questions, please don't hesitate to get in touch with us. And thank you all very much for joining us today.

Thanks, everyone.

Good afternoon and welcome to our first quarterly multi asset webinar of 2026.

My name is Joe Smith.

I work as a business development executive covering London and the South and have the pleasure of being joined by Trevor Gretham, our head of Multi-Asset.

Trevor, in what has been an eventful macro environment, to say the least, will take us through an update on our range and the importance of diversification.

We'll have the chance to answer questions at the end of the presentation, so please send these through the portal.

And so without further ado, I'll hand over to Trevor.

Great, Joe, thanks very much.

Thanks everyone for sparing the time to be with us today.

So we call this diversify, because the first defence against uncertain times is not having all of your eggs in one basket. We'll talk about the broad diversification that we believe in, but also how we're reacting tactically to what's happening in the world economy and in the world of geopolitics.

And as a quick sort of entree to the sorts of crosscurrents that our savers and investors are having to navigate, we've got AI. Is it a boom or is it a bubble? Or is it a boom, then a bubble? I don't know. But AI is massively transformational.

We've got Donald Trump. I've got him there from so-called Liberation Day last year applying tariffs to uninhabited Atlantic islands. Now he's in Davos telling Europe it's going in the wrong direction and threatening Greenland. You've got Putin, also another big threat to European peace and security in particular.

And in the background, although people aren't talking about it as much, we had one of the hottest years on record in 2025, I think the hottest year on record globally in 2025. So global warming is still very much an important longer-term theme.

So how do you make sense of all of this? Well, we think multi asset is a very sensible approach when you've got uncertainty, and you've always got a degree of uncertainty.

So we build portfolios that are aiming to meet customer needs for accumulation and decumulation. We have a robust and repeatable logical investment process implemented by an experienced team. And we're active on all levels to adapt with the time.

If you like to say there's no such thing as passive in multi asset, our strategic mix is active and continuously reviewed. We have daily tactical asset allocation, and we build our portfolios using Royal London single asset class funds with security selection, also active.

So active multi asset can manage volatility and aim to generate consistent returns in a fast-changing world.

So what's the outlook? Well, I think a couple of things just to say.

I always have this slide on here, which is a bit hard to see on the screen, but for those of you taking this away or reading through the slides, it kind of sums up the main views.

We're still broadly diversified, so we have assets spread across equities and bonds, obviously, but also commercial property and commodities as alternative real assets and inflation hedges, and then a broadly diversified approach to equity and fixed income exposure, which isn't a slave to the market capitalisation, for example, that would have you put 70% to 80% of your clients' money in America.

We're overweight equities and gold. But right up to the moment, we've taken some profits in those positions, given some of the uncertainties happening in the world, which I'm sure we'll come back to.

So we're only slightly overweight stocks. It's all quite overweight gold in the portfolios, particularly at the moment, and that's through our commodity exposure. And about 20% to 30% of our commodity exposure is in precious metals. That's already been benefiting us strategically, and get the words out.

And then we'll finish off by asking the question, is it an AI bubble or AI boom? And I think if interest rates are going down, you don't really have to ask the question too much. There's little air being pumped into the AI story. If the Fed were raising interest rates, if interest rates were going up, it would be much more like dot-com.

We'll come back to the investment clock. Actually, it's positioned in a fairly positive place for stocks, with growth indicators beginning to recover and inflation generally low enough for central banks to cut interest rates.

So let's have a quick review of last year. So it's a strong year for financial markets. I think it was the third in a row with roughly 20% return from global equities.

You can see this is rebased to 100 at the beginning of last year. And it's as of a couple of days ago. And you can see that global equities there are up about 20%, just short of 20%. UK equities, that sort of brown line, up more like 30%. So UK equities did well.

One of the reasons global equities underperformed was the dollar was really weak last year. It was one of the weakest years for the dollar since the 1970s. And that really took the shine off whatever was happening on Wall Street from a UK investor perspective.

You can see somewhere in there, commodities, it's the gold colour. So you can see actually pretty steady returns from commodities as a kind of inflation hedge.

And then top of the pile there is gold, which rose about 60% last year. It's up about 10% year to date.

Equities, a bit of a bumpy year, not off the best start. So normally seasonally the first quarter of the year is pretty strong into May, but we had the Liberation Day surprise and stock markets slumped and then rebounded quite strongly. And again, this is in sterling terms, emerging markets, UK equities and European equities were the strongest and the weakest regional market was America. So that dollar headwind really matters.

If you look at the full calendar year numbers here, we call this the patchwork quilt for obvious reasons, but it does actually show you the power of diversification. It's very hard to pick winners.

Some asset classes are at the top of the pile one year, the bottom of the pile the next year, and it's hard to be consistently just invested in a single asset class. If you look at the dark purple squares, you can see there the multi asset blend somewhere in the middle of the pack over time, which is what we're trying to do.

Some things to highlight from there, if you look back to 2020, stocks and bonds did really well. So balanced funds did really well in 2020, and diversification was a bit of a cost.

If you look at 21-22, being more broadly diversified, having exposure to things like commodities and property and UK equities was actually very beneficial.

Last two or three years, diversification has been diversification.

You'd have been better off in a US equity tracker, but we think that could be changing as we speak.

If you look at the portfolios that we've designed to meet customer needs, this is just a quick snapshot of the multi asset range at Royal London.

And it gives us the opportunity to announce a new GMAP.

So we have the Governed Range, as you know, an insured pensions and ISA range now, launched in 2009, moving all the way from a defensive fund all the way up to a pure equity fund.

The GMAPs are the on-platform equivalent, same multi asset concept, consistent, but not identical. In terms of all the detail, we launched GMAP Extra Adventurous, second to last in the range here to plug the final gap.

So if you're using Governed Portfolios and you've got business you're doing on third-party platforms, you can use a GMAP with very similar characteristics. Similarly, if you're using the GMAPs and you're considering insured pension business, It's a very cost-effective and successful solution in the Governed Portfolio.

So you should be able to see these as alternative access routes to the same investment proposition. And you can see that with the chart on the right-hand side that we've just pulled down from FE Analytics, as you could do yourself.

You can see the Governed Portfolio Conservative and overlaid on it since 2016 is the equivalent GMAP and the performance is really very comparable. If you look at performance for the GMAPs versus their peer groups, again, because of the strength of US equities in the last two or three years, they're lagging some of their peers over the one, two, three-year time horizon.

But you can see actually over four and five years, still quite significantly ahead of the peer group because of the broader diversification. And we don't manage these portfolios to the peer group. We manage to the investment objectives, which are trying to maximize real return after inflation for customers for a given level of risk appetite. And we manage to our investment beliefs.

But we do know that we have to compare ourselves to the funds that you have as alternative choices.

I've also got some stats here on the Governed Portfolios, more of them, a lot of numbers on the page there, but give you the same sort of story since inception.

We're active on all levels to adapt with the times. So we have strategic asset allocation, security selection and tactical asset allocation. And we'll go through those in a little bit more detail now.

So we're starting with strategic asset allocation. Your strategic asset mix is an active choice. And nobody comes to you and says, what I'm really looking for is 60-40 in equities and bonds. People will come to you with a savings objective, and we should all have a blank piece of paper.

What are the right asset classes to include? What shouldn't we include? What are the characteristics that will help give a better risk return trade-off?

So we look at all of the asset classes in our broad asset class universe, including inflation hedges like property and commodities. And we look at all of the possible portfolios we can build. And we'll select portfolios that are near the efficient frontier, giving you a really good risk-return trade-off, but also ticking other boxes.

So we're looking for good medium-term returns, and that's often related to the starting valuation. We're also looking for resilience to different scenarios, particularly emerging scenarios. And that's our approach. And it's not fire and forget at the product design stage. It's a continuous process, a bit like Queen Elizabeth, who had a bath once a year, whether she needed it or not.

We have a formal annual strategic asset allocation process where we review in great detail where we're positioned. Sometimes we don't take the bath, we don't change the portfolio if we think it's right, but we make sure that we've reviewed it.

And obviously, we're not the post office, sometimes mid-year, something big changes and we'll make a change to reflect valuation shifts that are happening earlier.

The three things that really differentiate the Royal London propositions from a typical global balanced fund, first of all, the real assets I've mentioned, including commercial property and commodities, more on that in a moment. That's the main differentiator actually when you look at performance. So if equities are doing really well relative to commercial property, we'll generally be lagging a bit in the peer groups and vice versa.

We have a more diversified equity exposure. We don't just follow the market capitalization weights. So for example, we consciously have a greater proportion of our equity exposure in the UK market and emerging markets. And we've got less exposure in the US. And in fact, this summer, or last summer I should say, we reduced our US equity exposure strategically on valuation and risk grounds.

Diversification also within fixed income, and that goes beyond traditional government bonds and corporate bonds into high yield bonds and asset-backed securities. You've got a very broad capability there.

We do think inflation hedges are necessary. I've been talking about spikeflation, which is a horrible word that I sort of invented in 2021 to reflect what was happening post-pandemic. You were getting a sudden surge in inflation, which called to mind the 1970s and the period around the two world wars when inflation became unanchored and you suddenly got these big price level shocks.

Inflation spiked up and then came back down again. What we were just saying at that time, was that there are structural changes compared to the 80s and the 90s and the early 2000s that make inflation more likely.

Obviously, there was the COVID stimulus in a supply constrained economy. That's what gave us the first kicker of inflation in 2021. But going into 2022 is geopolitics, the invasion of Ukraine, the Russian oil embargo.

In the background, you've got a gradual underinvestment in fossil fuel, although President Trump's trying to push in the other direction. You're getting a big drop in fossil fuel investments, which means there's a risk of supply shortages as we transition to net zero. You've got deglobalisation, trade wars, more tariffs being talked about in Davos today, structural changes in labor markets, massive public spending and populism. And above all of this, high levels of government debt.

And when governments have got a lot of debt, they quite often accidentally on purpose let inflation overshoot. This is a way of actually wiping debt clear.

So all of these things, I think, are still in my mind as why you need to have commodities as an inflation hedge in particular. If you look at property and commodities in a bit more detail, a lot of people are quite surprised by the chart on the left-hand side. And what it does is it compares the total return to a sterling investor of UK commercial property.

For those of you who've watched the property market for many years, it used to be called the Investment Property Data Bank Index, the IPD Index. It's now MSCI UK commercial property. It's the orange line. If you can see on that graph, there's also a purple line, which is UK equities, dividends reinvested, and a teal line, that turquoise line, which is global equities in sterling, dividends reinvested. It tells a lot of stories.

So one thing it tells you is UK equities and global equities, actually similar long-term performance, and up to GFC, UK equities were actually outperforming, and we may be going back to a trend of UK outperformance. You can also see that commercial property is pretty much kept up with equities. And there was a little moment there, like the day before Liz Truss's mini budget.

You've got a magnifying glass where the orange line was above the equity lines. So since the late 1980s, property was actually better than equities. You can see the big drop in property in 2022 post-mini budget, and it's recovering nicely. So you're getting about 7% per annum from property. And one of the things I like about property is it's not driven by equity sentiment. It's not driven by equity valuation. And when you got the dot-com crash in around 2000, an equity market's lost you about 50% of your money over three years. Property just chugged along, kept on going up.

And I think we could be in a situation here where coming back to that AI bubble or boom, having that diversification into commercial property may give you an alternative growth driver if equities encounter a bear market. It's hard to recommend property funds as a free-standing investment if you're worried about being gated in liquidity, but having typically 10% or so in one of our multi asset funds gives you that exposure without the same headaches in terms of getting in and out.

On the right-hand side of your screen, you just look at the return from commodities, depending on whether inflation is low, average or high. And obviously, as you go left to right, commodities tend to do better when inflation is higher. Commodities are a real-time inflation hedge.

Over the long run, equities and property beat inflation. On the left-hand graph again, that green line, the flatter line, is the retail prices index. So equities and property are real assets, but sometimes when inflation hits, like 2022, they drop.

In 2022, commodities went through the roof. So they give you more of a real-time hedge against inflation.

Looking at equities, I mentioned that we don't follow market cap. If we did, 70% or 80% of our equity exposure would all be on Wall Street and all in US dollars. You can look at the valuation on the left-hand side of different equity markets. And this looks at the cycle-adjusted price-earnings ratio. And the US is trading at 40 times. It got up to about 47 times in the dot-com bubble, but it's pretty heady right now.

The UK market and European markets are still relatively cheap. I like to say the UK is a buy one, get one free stock market because it's trading about 20 times cycle adjusted earnings, not 40 times. If you're very expensive, then on the right-hand side, the scatter plot shows over a 10-year time horizon. It tends to mean lower future returns. So it's kind of buy low, sell high.

And on that basis, stepping a little bit away from US equities in the summer was partly on valuation grounds, but partly because of concerns about political risk and what it might continue to do to the dollar.

UK equities have a different sectoral breakdown. It gives you more diversification by sector. And they typically give you more steady returns, more consistent returns, whether inflation is rising or falling. And you can see that in the table on the right-hand side. So UK equities have given you about a 5% real return, whether inflation is going up or down, whereas global equities have given you sort of nothing in real terms when inflation has been rising and 10% when inflation is falling.

So the growthiness of US equities and global equities makes them more interest rate sensitive. 2022 is a good case in point where the UK market was one of the best, most defensive performers. So again, if you care about inflation resilience and value, shifting a bit out of the US into the UK makes sense to us.

Finally, on fixed income, I'm sticking here with strategic asset allocation. We're going to come in a moment to our tactical shorter term views.

On the left-hand side, you can see why we've added to bond duration over the last two or three strategic asset allocation changes versus our competition. We had very little fixed income duration exposure prior to 2022 because real yields were negative. And I kept emphasising to people, prior to 2022, when the real yield on index-linked gilts got as low as minus two, you were paying for the privilege of lending the government money. You weren't being paid as an investor for lending the money. You were paying to lend in real terms, which is pretty crazy.

Now you've had this big repricing of fixed income. The real yields have gone from -2 to +2. So rather than you paying the government 2% a year for the privilege of having your cash, they're paying you to borrow it. So duration makes more sense. We've been adding to duration exposure in the funds.

On the right-hand side, you see credit spreads. The red dashed line seems to have drifted a little bit. It's meant to be at the lows of that graph. And what it's meant to be saying to you is that credit spreads are very tight. It's a bit like the same story around US equities being expensive, global high yield and US high yield is expensive. And that's one reason why we've been diversifying our credit exposure to other types of credit. The picture tells a thousand words.

On the left-hand side, we've got a straw man, which is a passive balanced portfolio, say 60 equities, 40 bonds. That would have about a 10% long-term volatility. On the right-hand side, you've got the Governed Portfolio or the GMAP Growth mix. Same kind of volatility, but you can just see much more diversification, less reliance on US equities, a bit more value towards the UK. You've got the property there in light purple, and you've got the commodities as an anti-bond inflation hedge in grey.

We build these portfolios using award-winning Royal London funds, both in terms of the equity funds, the fixed income funds, and the commercial property, and then we supplement that with exchange-traded funds or exchange-traded commodities or swaps to get commodity exposure.

Tactical asset allocation is, if you like, the day job. So every morning at 10 o'clock, the team meets and reviews tactical model inputs, including things like the investment clock, which is our way of thinking about the business cycle.

We've tested all of these different strategies going back decades to see how they would have helped you add value. Then on a daily basis, we implement them with the benefit of a bit of experience and judgement. So at times, we'll follow what the model signals are saying.

Other times, we'll say, well, hang on a minute, there's something slightly different going on in the world. So for example, as we're recording today, starting earlier this week, we started trimming back on equities on the basis that we thought there was some risk that Donald Trump would do this time last year and upset the applecart, this time with his sort of threats of invasion of Greenland or whatever he's currently talking about in Davos.

We've had some strong performance from asset class allocation in the last few months and we were effectively taking some profit until we could see how things settled down. That's actually kind of not adding new active positions, it's just taking some risk off the table when you're heading into an event that feels a bit like you're tossing a coin.

Which side of bed did Donald Trump get out of could affect markets quite a lot, and we don't have a prediction that helps us judge that. So at times we'll override to kind of reduce risk, and then when things settle down again, we'll go back closer to what the models are saying.

On the right-hand side you see not the current positions, but what comes out of those daily meetings is for each strategy what we would be overweighting or underweighting relative to the strategic benchmark.

We test all of these strategies back to now 30 years, and it was when I first started running this kind of approach at a different asset manager 20 years ago, this was like a 10 or 15-year backtest, and the window is extending. This is not an attribution of the added value from tactical asset allocation in any particular fund.

It goes back to 1992. What it shows is the current suite of tactical models we're using. This is the added value they would have created if we were using them throughout this period without overriding them. If you look really closely, you can see a bit of tactical underperformance at the very top of the graph there. So there was some marginal underperformance over 2025, particularly being whipsawed around what happened in March, April, May. But we started to see performance build up again positively since that time.

So the investment clock, first among equals of the tactical models, what's it saying for 2026? It's positioned in a relatively positive way for markets. If you didn't know anything about anything going on in terms of politics and all the noise in the world, what you'd see is a world economy that's doing all right.

Central banks around the world, with the exception of Japan, cutting interest rates, including the Fed, which is very influential. Rate cuts tend to take effect with a 6 to 12-month lag. So you would say, well, 2026, we're positioned for stronger growth.

So that yellow dot, which is the current reading from our quantitative read of what's happening in the world economy, should move upwards on your screen as growth improves. And then possibly if growth gets stronger, inflation could start to build again, and then you'd move up towards the top right.

All I'm saying is that clockwise motion you see on your screen could continue to move clockwise. And that's often what happens with the global business cycle. We don't second guess it. We track the macro data very closely to see what's happening. But at the moment, being on the left-hand side of that picture means inflation is relatively low, central banks can cut interest rates, and you're seeing a slight improvement.

If you couple those interest rate cuts with a possible capital spending boom centred on AI, then you can imagine actually it wouldn't be that hard to see a strong year building up. So the macro backdrop and the price momentum going into this period are actually set quite positively for stocks. Earnings are being upgraded by analysts.

The purple line here is a measure of whether analysts are upgrading or downgrading their earnings expectations, and they're still upgrading. And that's consistent with our growth scorecard in turquoise looking positive.

US equities have obviously been a really strong performer in recent years. This graph goes back to 2007. And really since the Lehman failure, US equities have been on a tear. They've been strongly outperforming. This is US equities versus the world in common currency. So the currency effect of whether the dollar is strong or weak also impacts this.

And you can see what's been underpinning that outperformance of US equities, which over this period, there's been an outperformance of something like 15% versus a rising global equity market. What's been underpinning it is the purple line, which is relative earnings. So you've had superior earnings growth in America, which has been driving out performance. But on top of that, that wedge, the white space, if you like, between the two lines is an increasing price-earnings multiple. So you've had a really strong positive earnings trend. And as a result, the US market, as we saw earlier, has got more and more expensive versus the rest of the world.

And that's where we're starting from. And tactically, we've been positive on equities. We've been slightly overweight US equities until recently. We've been overweight the growth sectors. So that's the communication sector that includes stocks like Meta. It's the consumer discretionary sector, which includes stocks like Tesla, and also the technology sector, which includes stocks like Nvidia. So we've had that tactical position on, but we are sort of asking ourselves, are we entering a period now where valuations might be too high, or there could be some kind of impact on relative returns from further dollar weakness?

Maybe there'll be some questions later on about things like, will Trump take control of the Fed? There are all sorts of things here which are questioning the sanctity of the dollar. And in the back of my mind is just a bit of economic history that sometimes the next great big thing ends up being too good to be true.

And this graph goes all the way back to the mid-1980s. Now, I started my investment career at a UK mutual insurance company in June 1992, which is quite near the beginning of this picture, and Japan was in everyone's mind as the bubble that had just burst. That's the purple line. All of these graphs show some kind of investment rebased to 100 when it peaked. So Japan spent 10 years massively underperforming. What took over them was the so-called Asian tigers of the mid-90s, and then they imploded.

The orange one is the dot-com bubble. Look how vertical it got towards the end. The green one is mining. When China was building new cities every year, mining stocks were very strong. The light blue one's a bit of an odd one out because it's actually the, rather than the relative equity chart, it's actually the absolute performance of UK long-dated index-linked gilts. Wow. You really lost a lot of money in long-dated linkers in 2022.

And then the last one there, the burgundy-coloured line, is MAG 7 versus the world. Now, you may well say, and absolutely you should say, I've rebased that one to 100 as if that's the peak. I could have done that a year ago or two years ago. Maybe this is going to the moon still. It could well be. But it's something to bear in mind that sometimes piling in with things that are already expensive does stack the cards against you.

At the moment, I'm not as worried as I would have been, as I was, about dot-coms in early 2000 because in 1999 they were hiking interest rates, you'll see it on this chart here. So in the middle somewhere here you'll see 2000 and you can see that purple line which is US Fed funds were going up.

There was a failure of the Long-Term Capital Management Hedge Fund in September 1998, some rate cuts from Alan Greenspan, this is going back a bit, and you had rate hikes all through 1999 and ultimately the bubble burst.

Where we stand at the moment you can see the Fed has been cutting interest rates recently. And if Trump were to take control of the Federal Reserve and put his own people in and demand lower interest rates, it might not be good for the dollar and for US credibility, but it might keep the stock markets inflating. So I don't see at the moment the pin to burst a bubble if it is a bubble. And we see lots of fundamental support that says it might not be a bubble. So still steady as she goes, tactically, we're not saying now is the time to ring the bell.

In 1999, the strongest bit of the performance, I'll go back a slide and this will let me do it. The strongest bit of the performance was actually in the last six months of 1999, when that thing went vertical. Goldman Sachs were talking last week about is this a bubble or not, and they were saying the same thing, that it might be a bubble, but you don't want to jump off too soon, because sometimes the strongest returns are towards the end.

So it's still tactically generally positive, although we've de-risked a little bit on geopolitics in the short term.

And to geopolitics now, on the left-hand side, you've got a geopolitical risk indicator, which has been quite high around the time of tariffs. It's, I think, going to go quite a lot higher when we next see updates to this. Stock market volatility, though, is quite low. And gold has been a very good hedge against all of this.

So where are we positioned? We are overweight stocks, but we have trimmed that back since this slide deck was put together slightly. We're now more modestly overweight stocks. We're overweight commodities, including gold. We're underweight the dollar, as you would expect from some of this commentary. We're long Japanese equities, is our favourite market at the moment, underweight Europe and the Pacific, and generally long the US growth sectors. But again, in the short term, we have de-risked.

So I'm happy to come back to the questions of course.

Thanks so much for that, Trevor. As ever, very interesting, especially during the times that we live in today.

And we've got one question through here on one of the world events, so I'll read it out. With the US threatening to hit some EU countries with tariffs pressured Denmark over Greenland, we have seen a high degree of European unity. Should Trump manage to take control of Greenland, what changes in alliances could we see from other countries, and how will this affect the multi asset investment landscape in the long term?

Okay, so gentle one to get started with, isn't it? And this is a really serious time, isn't it?

And I think I mentioned in that sort of spikeflation slide, sort of deglobalisation, and Trump is a great example of deglobalisation. Tariffs are making countries want to have basically production chains, supply chains that are either in their own country or with friendly nearby countries. So I think you could see big swings between the dollar and other currencies, again, as part of the deglobalisation.

Like a lot of people are quite worried about what's going on. I think if Trump were to invade Denmark, that obviously destroys NATO. Just talking about invading Denmark is making the Europeans send troops to, I say, Denmark, Greenland. And you can just see how it's just souring transatlantic relations. Trump's in Davos saying Europe's going in the wrong direction. His national security strategy, which was published about a month ago, was eye-popping. So in it he said he wanted, quote, strategic stability with Russia. And there were pages and pages about how he disliked Europe and the European Union and liberal democracies and rules-based order. So Europe, we're public enemy number one for Trump at the moment.

And whether it actually comes to anything in terms of actual conflict or actual invasion or whether actually the relationship just sours and then Trump uses something as an excuse to turn his back on NATO. I think that's where we're going.

NATO is becoming European NATO, maybe with Canada included. And that's just going to strengthen Putin's ambitions.

So you've got a strongman, kind of G3, if you like, with the US saying the Donroe doctrine. I was a student from American history at school. That's Monroe Doctrine, where it's basically saying that America's backyard with South America and hands off imperial powers. Venezuela's an example, Greene has an example of Trump basically saying, if it's near me and I'm stronger, I'm grabbing it. It's just going to empower and encourage both Xi and Putin to do the same. So the geopolitical risk is just going up.

And that says to us that gold is still a useful hedge against that risk.

And Jamie Diamond recently said capping credit card spending at 10% would be disastrous. I'd be happy to hear your thoughts on that as well.

So Trump is firing out lots of stuff. He's really worried about the mid-term elections. You know, the sort of unrest that's being created in the cities like Minneapolis by ICE and the fact that you've got an almost conflict between state, militia and police and federal agents. I kind of worry slightly whether the mid-term elections will even happen.

Now, no one put a high probability on mid-term elections being cancelled, but 10, 20 years ago, you just said, get out of here, 0.00, 1% chance. Now it feels like maybe a 10% chance that things are so stirred up in America that democracy is threatened.

Trump's also, though, firing out all sorts of ideas trying to get popular by November. So he hasn't ruled out the idea of elections. He just wants to win them. And one of the ideas was capping credit card charges at 10%. And I immediately saw that and said, this is one of those things with unintended consequences. Because if you say to a lender, and JP Morgan's a good example, you can't charge anyone more than 10% for a credit card, JP and Wilgen will say, oh, well, I'm not going to give you a credit card then. Because the reason they're charging 20% plus is because they've got a lot of defaults and losses. And unfortunately, the good borrowers end up paying the costs of the ones who defaulted. And if you say 10% is your limit, there'll be lots of subprime borrowers that just can't borrow.

So lots of crazy ideas being fired out. And it all feels to me like a really chaotic US policy backdrop. And normally, the US and the US dollar is a safe haven in time to travel, but it feels like the epicenter at the moment.

Of course. And we've got another question actually here on the US.

So US long-dated bond yields are not coming down. This is unusual with rates being cut. What impact does this have on your thinking at present?

Yeah, well, normally, when the Fed's cutting interest rates, bonds do well. In fact, about a year ago, we did one of these webinars where I showed a table which said the one thing you can be sure of is the Fed's cutting rates to make money in bonds. Now, we're never positioned for that because our tactical models never agreed with that idea because they picked up what's happening, which is sideways to higher 10-year yields. It is unusual. And I would say safe haven demand for US treasuries is instead going into gold. So people who normally buy US treasuries, foreign central banks included, have been stocking up on gold instead.

Fantastic. We'll do one final question and we'll touch on this question here we have about Japanese 10-year yield spiking to levels not seen in decades on fiscal and Bank of Japan normalisation pressures. Might this be the pin that pops the long global debt supercycle, repatriating Japanese slows and lifting yields everywhere?

Yeah, I mean, it's so on one level, nothing to see here, because I looked into this last night, and you normally compare bond yields to nominal GDP growth. And if you look at the 10-year average of Japanese nominal GDP growth, that's GDP growth plus inflation effectively, it's two. And the 10-year yield is about two. The 40-year yield's higher, but at 10 years is about two. So at the moment, Japanese bond yields, the rise in bond yields is reflecting a stronger economy. And finally, they've managed to get some inflation back into the system. So that's not a bad thing. And I don't think rising bond yields in Japan are going to cause anything to break in Japan. But it's a fair point that the Japanese own a lot of unhedged US dollar fixed income. And if the dollar is weak and interest rates at home are actually quite good anyway, you could see a repatriation.

You haven't seen it yet because the yen has remained quite weak. But it does concern me that there could be, if there were a kind of big risk-off event, you could actually see a weak dollar. And that would put pressure on non-US equities. So it might be a US problem, but if the US catches a cold, we all sneeze. If the dollar suddenly goes down and the yen goes up and the euro goes up, it's going to hurt equity markets elsewhere as well. So it's all part of the sort of unease.

But on the one hand, we've got the tsunami of tech-related earnings driving equity markets to all-time highs. On the other hand, we've got geopolitics keeping bond yields high and they should be strengthening gold and weakening the dollar. And it's almost like two parallel universes.

So if the geopolitics show can just about keep the wheels on the road, which it normally does, then I think the fundamentals will look quite positive. But you do need your hedges.

Coming back to the the presentation, this is why we think having commodities, having the ability to invest in gold, having a tactical overlay, having a value-based approach to strategic asset allocation, we think these things will hold good.

Fascinating.

And thanks so much for that in what is truly sort of turbulent times at the moment.

So if we didn't get to your question today, don't worry too much as one of our sales team will reach out to you. We're all on the screen there. And yeah, I suppose you can see my face there.

Thank you very much for your time. And if there's any sort of questions, do feel free to email them across.

Thank you very much.

Thanks, everyone.

The Multi Asset funds that we manage are overweight equities, especially Japan and the US growth sectors, and overweight commodities including gold.

There are three things to talk about this month. One is the business cycle and the investment clock, another is AI, and the third is geopolitics.

In terms of the business cycle, the investment clock is moving into equity friendly recovery, growth indicators are pointing upwards after a year of central bank interest rate cuts and inflation is relatively low, and that backdrop is usually good for stocks.

The AI sector in America is driving earnings but it's also causing very high valuations. And that does make us a little bit nervous about longer-term returns. If you think about the AI sector, it's looking in some ways like dot-com’s in the late 1990s. It's an economic boom but will it end with a bubble?

For now, we're positive on those US sectors and we think stock markets will continue to be driven more positively by the AI trend, partly because interest rates, unlike 1999, are going down, still. We aren’t seeing central banks trying to rein in growth or rein in speculation, so still positive on the technology sector as well.

But geopolitics has got to be mentioned this year. It was very important last year to the shape of returns with the tariff shock in April. And this year, I think we're also seeing potential turbulence from US policy and that could result in further dollar weakness, which is important from a strategic asset allocation point of view, it could also fuel further strength in gold, and being overweight gold it’s something that's really benefited the funds in the last couple of years. And for us it's the most obvious hedge against geopolitical risk.

So summing up, we are overweight equities, the business cycle is actually quite supportive. At the moment the technology sector is running very strong. We think that could continue with interest rates going down. But being diversified, including things like commercial property which is a better value way of accessing long-term growth, including commodities and gold as a geopolitics’ hedge, we think diversification is definitely important this year more than ever.