This note contains an overview of our market views, what we are watching, and our portfolio strategy. Any reference to portfolio positioning relates to our Flagship Solution. Clients with bespoke discretionary or advisory portfolios should consult their Client Advisor for the latest update on your portfolio.
Going forward, we expect uncertainty and volatility to remain high and have built our flagship portfolios accordingly. We’re globally diversified and hold low-volatility equities and gold (a position we increased very recently) to protect against geopolitical risks, as well as policy uncertainty in the US. We also hold positions in broad commodities and inflation-linked bonds, both of which could benefit from supply-side disruptions caused by the Iran-Israel conflict.
Obviously, the ramifications of these events remain unclear. Market volatility tends to rise and fall with the news, so we seek to diversify our exposures across asset classes and geographically, anticipate developments and adjust portfolios in a composed manner, avoiding overreactions, to stay active tactically but also invested for the longer term to compound returns.
Where permitted by client knowledge and experience, and investment guidelines and regulations, such as in our flagship funds, we also own an 'insurance' instrument that appreciates when US equities fall, potentially helping cushion the impact of a hypothetical drawdown.
As mentioned above, the Bank of England followed suit and held bank rates steady at 4.25%, as inflation continues to decline but remains above target. Even though recent data show that the labour market is cooling and inflation is easing, policymakers seem reluctant to cut rates, given the elevated level of uncertainty brought on by the tensions in the Middle East.
Our base case remains one where central banks are near the end of their rate-cutting cycles. However, there's significant uncertainty in the market and some signs of economic slowdown. Therefore, we believe that risks are tilted towards more rate cuts, though limited given the inflation risks. We think the threshold to lower rates is higher in the US, where inflation is higher, compared to the Eurozone, with the UK in between.
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Information correct as of 23 June 2025.
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