Dr Bevan Blair

We are entering an interesting period for markets. Having slain the inflation beast in the second half of 2024 and with rate cuts being enacted, central banks will be wary of a potential re-ignition of inflation. This is made more acute as new governments globally look to address low growth with expanding fiscal policy. A potential tariff war globally is also a real risk to rate cuts.

The market has already discounted significant cuts to rates in 2025, and we believe that while we are still in a cutting part of the rate cycle, there will be fewer cuts than expected. However, there is still significant value in sovereign and investment grade bonds, and so we are maintaining our position.

The effect on equities will probably be neutral, and as long as earnings hold up, they should provide decent returns.