Dr Bevan Blair

Inflation has returned, and while we have not altered our bond position, we do not intend to increase duration in the short term despite the potential for further rate cuts. The steeping on the yield curve over the past six months has implied a market shift in inflation expectations, and we currently see little chance of capital appreciation from the long end of the curve. Our best scenario is flat returns with coupons, providing some positive return. Increasingly we are worried about the lack of earnings globally, and while the US headline is positive on earnings we note that this is very concentrated. At these elevated valuation levels, earnings may not grow enough over the next year to justify these levels.

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