James Burns

Despite a broad-based equity rally since April the investment backdrop remains fragile, shaped by shifting economic data and persistent geopolitical tensions. Our base case is of a lower growth, higher inflation environment. Stagflation remains a tail risk, but one for which we are proportionally prepared as we continue to hold meaningful allocations to gold, infrastructure, inflation-linked bonds and REITs. Considering the uncertain sovereign deficit outlook, we maintain an overweight to alternatives and underweight to sovereigns. Within bonds we see an increased importance of being duration constrained and sheltering in the shorter dated end of the yield curve. Finally, in terms of the implications of a weaker US dollar, our overseas fixed income exposure is hedged and our gold allocation provides a natural offset to dollar weakness.

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