James Flintoft

The summer was positive for risk assets as the trade war rhetoric faded, and investors refocused on the AI theme and corporate fundamentals. Although a lot of attention is still on the US equity market, it is interesting to observe the AI trend having a strong positive influence on Chinese equities, and indeed many other markets generating strong returns. The shifting equity market narrative has little impact on core strategic asset allocation decisions, where diversification and taking the appropriate amount of equity and credit volatility for a given risk appetite is key. The bond market has taken a less optimistic view over the summer, particularly in the US. Selective signs of weakness in the US economy have seen Treasury yields decline, however the gilt market remains on edge over inflation uncertainty and the fiscal scrutiny that will be heaped on ahead of the budget. Markets are coming round to our way of thinking on inflation. However, we continue to prefer a cautious approach to duration to ensure government bond allocations present minimised downside risk for portfolios.

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