Myron Jobson: Hello everyone, and a very warm welcome. I’m Myron Jobson, and I’m delighted to be your host for today’s Investment Insights webinar. I’m joined by Oliver Jones, our Head of Asset Allocation, and John Wyn Evans, our Head of Market Analysis — two people who stay calm and analytical even when markets try their best to unsettle us. This webinar comes at an especially interesting time. The conflict in Iran, though thousands of miles away, has created very real ripple effects for investors, not least because of the jump in oil prices, contributing to heightened market volatility and affecting the value of investments, pensions, and stocks and shares ISAs. Then there are the tariff developments. As we near the first anniversary of what President Trump dubbed Liberation Day, when he introduced a wave of tariffs on imports from around the globe, key questions remain. The US Supreme Court struck down those tariffs on the 20th of February — I know that date because it was my birthday, which turned out to be a much busier day than planned as a result. But the full implications of these tariffs are still emerging, and it’s unlikely this will be the final word on the matter. And with the new tax year approaching and ISAs and pensions allowances resetting, it’s understandable that some investors may be feeling a little uncertain. All of this reinforces a simple but essential point: avoiding overexposure to any single region, sector, or asset type is crucial. Diversification remains central to effective investment management, and that’s a key theme for today. Oliver and John will help cut through the noise — understanding the forces shaping the markets, assessing the risks worth watching, and identifying where longer-term opportunities may be emerging even amid volatility. As always, we love your participation, so please share your questions in the chat at any time, and we’ll cover as many as we can during the session and in a dedicated Q&A at the end. There’s plenty to cover, so let’s get started. John, Oliver, thank you very much for joining me. And actually Oliver, I would like to start with you with the first question. So let’s start with the impact of the US airstrikes on Iran, which have caused energy prices to surge. Can you put the risk to the global economy and markets into context for us?
Oliver Jones: Thank you, Myron, and good afternoon everyone. Like you said, I think the best place to start with this is by just showing energy prices in context. We’ve seen the price of a barrel of oil rise from $60 at the start of the year to more like $100 now. I’m just going to show on screen in a moment what that looks like in broader context. You’ve got the price of oil with the blue line, and I’ve also added the price of UK natural gas in green. On the right-hand side of the chart, the recent moves are significant — not quite as large as those we saw from 2020 through 2022, but still significant nonetheless. This will make a real difference to inflation. Take the UK, for example: we’re already seeing the impact on petrol prices. From June, we’ll see the impact of the increase in gas prices on our energy bills. Around the third quarter of this year, that will probably be adding about two percentage points to inflation. Inflation would otherwise have been about 2%, but it’s now likely to be around 4% in Q3. Similarly, in the US we’ll see an impact — not quite as big because they don’t have that gas-price dynamic, as they have a more insulated gas market. But gasoline prices are beginning to rise, and that will probably add about one percentage point to inflation, taking it to about 3.5% later this year. Plus, there will be additional effects on food prices, plane tickets, and more. So in each case there will be a noticeable effect on inflation. But when we speak to clients, many people think back to 2022 after Russia invaded Ukraine. There are some really important differences this time. People often forget that, when Russia invaded Ukraine, there was already a significant inflation problem. In the UK, inflation was already above 6% before Russian tanks rolled over the border. So it wasn’t just about energy — the post-pandemic environment, very supportive fiscal policy, multi-trillion-dollar spending packages in the US, ultra-low interest rates, and extremely tight labour markets all contributed. Back then, we had a much broader inflation problem than we do now. Inflation in the UK has been falling recently — it’s down to 3%. Why do I mention this? Because it really matters for interest rates. In 2022, interest rates rose by 5 percentage points. We think something like that is much less likely this time, because that broader inflationary backdrop is missing. That’s a positive thing for the impact on economic growth. In 2022, there was a big slowdown in growth because of the combined energy shock and interest rate shock. This time, we are unlikely to see such a big increase in interest rates, meaning the impact on growth should be more manageable. With energy prices where they are now, global economic growth is still on track for around 3% this year. What’s happened so far might take 0.1 or 0.2 points off that. We must acknowledge uncertainty, but we are not in a 2022-style scenario at the moment.
Myron Jobson: Thanks for that, Oliver. And just one more thing on energy — is the concern not just that prices have spiked, but how long they may stay elevated?
Oliver Jones: Exactly right. The statistics I mentioned — adding two percentage points to UK inflation and one to US inflation — are based on the assumption that energy prices stay at these elevated levels for a year. If prices reverse very quickly, we’re unlikely to see a lasting inflationary effect. But of course the concern is that disruptions to energy shipping persist. We think the oil market is factoring in between one and three months of disruption in the Strait of Hormuz. If it lasts much longer, we could see a bigger impact on inflation than I outlined.
Myron Jobson: And you’ve talked before about structural features of our portfolios designed to build resilience against this sort of shock. Can you remind us what they are?
Oliver Jones: Of course. Something we’ve discussed since 2022 and 2023 is that the likelihood of inflationary shocks has increased, so we’ve adapted our portfolios to be more resilient. In fixed income, we’ve shortened the maturity of bonds we hold — shorter-maturity bonds are less sensitive to inflation shocks. We also hold more inflation-linked bonds, where cash flows are directly tied to inflation. We have diversifying strategies like macro funds and multi-strategy funds that are well placed to take advantage of such environments. And finally, in stock selection, we allocate directly to companies benefiting from structural themes — such as Europe rearming and strengthening infrastructure in response to a more uncertain global environment. Those are just a few examples.
Myron Jobson: Sure. John, I want to bring you into the conversation. Tell us a bit more about gold in this context. What’s been driving it recently?
John Wyn Evans: Thanks, Myron, and good morning everyone. I think this proves we’re not going to shy away from difficult questions, because the gold price has come down quite sharply. It started the year around where it is now, went up 20% — almost to $5,500 an ounce — and then came back again. In longer-term context, though, it’s up about 35% from where it was a year ago. Structurally, if you zoom out far enough — even thousands of years — gold tends to retain its value. One benchmark people use is that an ounce of gold will always buy a very fine gentleman’s suit. At $5,500, we were very much in Savile Row territory, so a pullback wasn’t surprising. There were signs of speculative activity — people using borrowed money to buy gold at those levels — so we’ve had a sensible shakeout. Gold is used as a diversifier against risks. People like it as a geopolitical hedge, and over the long term it’s considered an inflation hedge, though it doesn’t always behave that way in the short term. We’ve also seen central bank buying increase since 2022, especially after Russia lost access to its dollar-based assets due to sanctions, forcing it to diversify into gold. Other central banks have done the same. They’ve been the main buyers of gold for the last four years. We still see it creeping into retail and institutional portfolios, but not yet in a way that I think couldn’t still increase in the longer term. But as far as we’re concerned, it’s something we want to stay with strategically for the long haul.
Myron Jobson: So John, given the recent volatility of the price of gold, are there now question marks about its role as a diversifier within the portfolio?
John Wyn Evans: There are always going to be question marks, because you would think, well, hang on a minute — war is the sort of thing that should make gold go up. But again, if you look over a longer period of time, you have to treat that volatility as something you can potentially take advantage of, especially when there’s been a sell off like we’ve seen now. So we’re still committed to it. Just very briefly on that point, it shows the value of having gold but also other diversifiers — the macro funds, the multi strategy funds, even the short dated inflation linked bonds in a portfolio. We don’t think about gold as the only form of protection.
Myron Jobson: Sure. And John, taking a step back from the Iran news — another theme you’ve been talking about recently is regional diversification, including a more positive view on developing markets. What’s behind that view?
John Wyn Evans: OK, well, we'll take that in two layers. First of all, in terms of broader global diversification, particularly in our equity exposure, we want the ability to invest in the best companies in the world wherever they may be, and not just be confined to UK companies — although there are many very fine UK companies. To that extent, having broader global exposure in portfolios is something that's been running through most of the wealth management community, and I think we've shown some leadership on that over the last few years. Interestingly, if you look back to last year, US equities had been very strong. They did have a decent year: the S&P 500 was up 17% in dollar terms, though somewhat less in sterling and euro terms because of the weakness of the dollar. But emerging markets, European markets, and the FTSE 100 all outperformed it. So if you'd been fully committed to the US, you’d have lagged last year. This year has been slightly different. At the beginning of the year, emerging markets and European equities were doing quite well. They’ve been put on the back foot a little by what has happened in Iran, and now, funnily enough, US equities are providing some stabilisation in the portfolio — as well as the dollar increasing in value again. It all helps to dampen volatility during these sorts of moments. Specifically to emerging markets, it’s more a case of us having had a more negative opinion of them, particularly because of China and the problems it was still going through. So we neutralised that position. But we now see positive trends and developments. For example, earnings growth across emerging markets is starting to pick up, and there’s greater breadth of that growth. Our quantitative modelling has also shown developing markets improving on our scorecard. And again, the term “developing market” is a bit of a misnomer these days, when you look at some of the companies you can buy and what they’re involved in. Many of them are at the forefront of new leading technologies, and we want exposure to those.
Myron Jobson: Oliver, do you have anything to add from an asset allocation point of view?
Oliver Jones: Yes — John touched on the importance of China. For most of the time I’ve been researching emerging market equities, China has been the key driver. In the 2000s and 2010s, what happened to China — especially its property sector — determined whether emerging markets outperformed or underperformed the rest of the world. What’s been interesting in the past year and a half is how that has changed. Part of that change has been the huge investment spending in the US on AI. That might sound odd, but the biggest suppliers to US tech firms of chips and memory for their data centres are in developing markets — Korea and Taiwan in particular. Then there’s the strength of industrial metals prices, which has occurred despite China’s property sector still being in the doldrums. That’s partly down to AI, but also to broader forces like the energy transition and countries prioritising energy resilience — which ties into what we discussed earlier. There are also countries in emerging Europe benefiting from Western Europe rearming, as their supply chains are tied in, and we've seen some positive domestic growth stories across emerging economies despite continued weakness in China. All of this, combined with what John mentioned on the earnings side, means we’re seeing an earnings cycle in developing markets gathering strength — even with China’s weakness. That’s a real change from the past.
Myron Jobson: And are there other factors behind the broader strength of profit growth in developing markets?
Oliver Jones: I’ve mentioned the key things: first, the AI related capital expenditure from US tech firms. Some worry about this in the context of rising energy prices, but AI data centres are mostly exposed to US power costs — and the US is insulated from what’s happening in the Middle East because of its own gas market and other energy sources. So that remains a resilient driver.
We do watch that AI spending carefully for signs it might become less sustainable. We’ve seen the companies financing it issuing more debt since late last year, but they’re starting from very strong balance sheets, so the positive earnings trend can continue.
Myron Jobson: How might that strength in profit growth interact with the volatility that followed the strikes on Iran? What are the risks to developing markets?
Oliver Jones: We’ve been thinking about this carefully, as you’d expect given the significant moves in energy prices. Developing markets are a broad umbrella covering a huge range of countries. Some emerging economies, particularly in East Asia, are big energy importers and are therefore more exposed to higher prices. Others — in Latin America, for example — are neither big importers nor exporters. And some are energy exporters. So it’s a mixed picture. There are opportunities in countries not too heavily exposed to what's going on. As I mentioned earlier, many companies in East Asia are benefiting because the demand ultimately comes from US AI related investment. That provides some protection. Some people assume that in an energy shock environment, developing markets are hit first. I don’t think that’s necessarily true this time. Relatively speaking, Europe may be more hurt by rising energy prices — possibly from both a higher sensitivity and a slightly lower growth base. Developing markets may actually have a greater cushion to continue growing. It’s also worth mentioning the structural themes that we think about — the structural sources of demand that might actually benefit from this geopolitical instability. One is the energy transition, which is linked to demand for industrial metals, many of which are produced in Latin America. That’s a potential indirect beneficiary. Another is the European push for rearmament and for Europe building up its own infrastructure. As I mentioned earlier, many companies in emerging Europe benefit from that because they are part of those supply chains.
John Wyn Evans: And I think just to round off that point, this is a really interesting juncture with everything going on. If you think about it, we’ve had several big alarm calls this decade around supply chain management and how vulnerable those chains are. We saw it with COVID, then when Russia invaded Ukraine, and to some degree with the tariff announcements you mentioned — Liberation Day — and now again with the attacks on Iran. It’s almost as if the alarm has gone off three times and we’ve hit the snooze button each time. At some point you have to get out of bed and do something. Countries will have to build more redundancy into supply chains, hold more inventory, build security into the system. All of that becomes a longer term, structural source of demand for services and particularly for commodities — many of which come from developing economies. Hopefully this will create a big difference, and as Oliver mentioned, there’s also the potential for renewable energy and everything surrounding that. Once again we’ve had another reminder of how dependent the world still is on supplies from the Middle East.
Myron Jobson: I want to zone in on AI — artificial intelligence — which you discussed, Oliver, and talk about it with you as well, John. How is sentiment towards AI evolving in markets more broadly?
John Wyn Evans: We’ve been through some interesting times with this. We’ve been flagging for quite a while that there was a risk for the big spenders in AI — the hyperscalers building major data centres — mainly American companies such as Amazon, Alphabet, Meta, Microsoft, and also Oracle. In 2026, capital expenditure in this space is going to be in the region of $600 billion to build out data centres, and that level of spending is likely to continue for years. They are highly committed. That means cumulatively, we’re looking at around $3–5 trillion of capital spending. For the last two years, people have been questioning what the returns on that will be. There’s already some scepticism built in. We’ve seen the so called Magnificent Seven companies underperform recently — although they are still very strong, and there’s nothing like the risk we had in 2000 when growth was coming from companies with no revenues and huge debts. These are highly profitable companies spending out of cash flow. The question is whether they will see a decent return, which depends on whether people and businesses pay for the services generated.
That’s one layer of uncertainty, and the questions still aren’t fully answered. The next layer is the companies providing the materials and services for data centres. Nvidia has been the key player with its chips — now the biggest company in the world — and there’s no reason to expect that to change soon. But it’s not just chips. It’s everything: racks, cooling systems, cabling. The spend here also looks set to continue. There are risks from higher energy prices or component shortages due to geopolitical issues, so things are somewhat up in the air, but the overall trend is still positive. Then at the bottom of the stack are the companies and individuals using AI, and how AI will enhance their businesses, profitability, and our lives. Last summer, MIT put out a study suggesting only 5% of companies using AI had seen benefits — leading some to say AI “doesn’t work.” But looking closer, many were simply plugging in generic large language model tools without tailoring them. You need proper application specific tools to get value. Companies are now starting to learn that, and benefits are beginning to come through. Will there be a massive productivity boom from AI? I don’t know if it will be a boom, but the direction should be positive. There will also be implications for jobs and younger workers entering the market. As ever, there will be winners and losers, and that’s where we rely heavily on our research analysts to identify which companies will benefit and which may not.
Myron Jobson: On that applications point — is there now a sentiment that, as more companies adopt AI systems into their operations, they themselves are becoming “AI plays,” perhaps unwittingly?
John Wyn Evans: AI plays — possibly positively — but there’s also discussion around the negative side, particularly for software companies. Some wonder whether businesses will need to buy software packages at all or whether they could design something themselves through what’s being called “vibe coding.” At the margins, that might be an issue, but large companies need security, reliability, and compliance. Whether they buy software or build it, mistakes could make them financially or legally liable. So the landscape is more complex. People talk about AI as one concept, but there are many strands, and we’re still untangling them.
Myron Jobson: Can we talk about tariffs?
John Wyn Evans: Why not? Let’s do that.
Myron Jobson: Should we start with a basic question? What is the state of play now when it comes to tariffs? Oliver, I’ll come to you first.
Oliver Jones: Sure. You mentioned it earlier — the tariffs President Trump imposed on what he called Liberation Day last year. They were authorised under an International Economic Emergency Powers Act but have now been struck down by the Supreme Court. So the very high bilateral tariffs are gone. President Trump has tried to replace them using another act that allows him to impose a temporary blanket tariff on the rest of the world for 90 days, after which congressional approval is needed to continue — which he may struggle to get. He may try to plug the gap with other mechanisms. There are several legal tools that can be used, and some already have been — particularly targeting specific sectors like cars. Two big things here: First, the moment of maximum danger to the global economy from tariffs is past — that was last year. The highest tariffs are gone. But second, the fundamental change remains. Tariffs will still be significantly higher than before Liberation Day, and the global trading system has changed.
We’re in a world where inflation is likely to be higher and more volatile. Inflationary shocks — like tariffs and geopolitical events — will be more frequent. So everything I mentioned earlier, such as shorter dated government bonds, inflation linked bonds, and diversifying assets, becomes even more important.
John Wyn Evans: Yes, we just have to accept that tariffs are here to stay for the foreseeable future — though not necessarily at super punitive levels. As Oliver said, US tariffs are now in the 10–15% range. And Trump clearly sees tariffs as his political tool of choice. He’s recently threatened tariffs on anyone delivering oil to Cuba, for example. And tariffs aren’t just a US phenomenon. The UK and Europe use them too — particularly against China — in response to product dumping such as electric vehicles and excess steel. The UK recently imposed extra tariffs on Chinese steel to protect our domestic industry. The point of maximum fear is behind us. Companies have learned how to work around tariffs or absorb costs. Tariffs are now just part of the furniture.
Myron Jobson: And just to wrap up this segment — Oliver, what are your key messages from a positioning point of view?
Oliver Jones: Two key things. First, what happened in Iran is a classic moment where uncertainty is extremely high. News changes by the hour, markets are volatile, and it’s emotionally charged. These are exactly the moments when it pays to avoid knee jerk reactions and instead follow a disciplined, systematic process. Our process, grounded in evidence and what has worked across cycles, helps prevent us from being whipsawed by headlines. Second, it’s impossible to predict when and where the next geopolitical shock will happen. So we build resilience into portfolios: shorter dated government bonds, inflation protected bonds, diversifying strategies, and high quality companies with strong balance sheets and competitive positions. We also invest in companies benefiting from structural themes like Europe rebuilding defence and infrastructure. These decisions help us remain resilient in a volatile world.
John Wynn Evans: And I’ll add the behavioural angle. With constant news updates in our pockets, we’re exposed to volatility 24/7, making emotional decisions more likely. Historically, if you didn’t look at markets for two weeks on holiday, you’d avoid that noise. Now it’s always on unless you actively switch it off. At the moment, equity markets are trending downward because of uncertainty over Iran and the Strait of Hormuz. Each day without resolution makes people gloomier. But the risk is the other way too — we can get sudden positive news, which is exactly what happened yesterday when European equity markets jumped 4% in moments after a single Donald Trump social media post. You can see how easy it is to miss out on that recovery, because you will never have a chance to react to it either. That’s why we talk so much about remaining invested during these periods, while obviously being aware of tail risks and how we defend against those in portfolios.
Myron Jobson: Thanks, John. And now let’s move on to answer some of your questions coming through the chat. During the conversation, I’ve been looking through the chat and there are some really interesting questions, several around a common theme — the UK. I’m looking at you, Oliver. Perhaps I can consolidate some of these questions. What are your views on the UK market at the moment, taking into account everything going on more broadly?
Oliver Jones: The UK is perhaps a little more exposed than some of its developed market peers to what’s been happening in the Middle East for a couple of reasons. First, unlike the US, we are heavily dependent on gas prices, so we’re affected by disruption to gas supply. Second, inflation in the UK was a little higher than in some other countries — 3% versus just below 2% in the eurozone, for example — just before this happened. The Bank of England, had events in Iran not taken place, probably would have delivered some small rate cuts later this year. That now won’t happen. It may slightly raise interest rates, though probably not by the full percentage point markets briefly seemed to expect — that’s going too far. But there is slightly more risk of this in the UK than in the US or eurozone. It’s reasonable to consider that specific UK risk, but also important to keep it in context. As I mentioned earlier, this is not a 2022-style environment where inflation was already 6% and surging.
Myron Jobson: There’s another question relating to the outlook for interest rates and gilts. John, perhaps I can come to you on that — especially after the Iran shock?
John Wyn Evans: We’ve already seen quite a sharp pickup in longer-dated gilt yields, and shorter-dated ones too. Short-dated yields are driven by expectations for the base rate. A few weeks ago, the market was pricing in three or four interest-rate cuts this year. As of early yesterday morning, it was expecting four increases. That’s a massive swing. It has eased slightly since then.
I think a lot of traders were positioned heavily for rate cuts and have had to unwind quickly, pushing things too far the other way. There may be opportunities there. At the longer end, gilt yields reflect concerns about the UK’s fiscal soundness. Recent events have likely eaten into the fiscal headroom Rachel Reeves worked hard to build. It was around £23bn after the Spring Statement. But lower growth, potential energy subsidies, and higher interest costs all weigh on government finances. We saw the 10 year gilt yield go above 5% yesterday — the first time since 2008 — though it finished around 4.9%. That’s higher than during the Truss mini budget moment. There’s pressure, no doubt. But in the longer term, if push comes to shove, the Bank of England may find ways to lean on the market to keep rates down.
Myron Jobson: And what about government borrowing costs?
John Wyn Evans: Interestingly, the fiscal situation had been improving with recent growth and strong January tax receipts. We’re not in deep trouble — debt is under 100% of GDP, and higher in other countries. And crucially, Chancellor Reeves has been consistent in not wanting to play fast and loose with the finances. But external pressures are building.
Oliver Jones: This ties back to what I mentioned earlier. Structurally, we hold government bonds with shorter maturities than in the past. It’s a clean, simple way to insulate portfolios from geopolitical risk and fiscal pressures — shorter-dated bonds are much less sensitive than longer-dated debt. You might be interested to know: if you’d owned a 2028 gilt since early March, you’d have lost about 1%. A 2031 gilt — around 2%. A 10 year gilt, closer to 5%. And a 2061 gilt — around 12%. The further out the maturity curve, the higher the volatility — but also the potential opportunities when value reappears.
Myron Jobson: Let’s talk politics, because this next question interests me. We’re only a month and a half away from the UK local elections, which are likely to be tough for Labour. Should investors be concerned about a potential leadership challenge to Keir Starmer? More broadly, is political uncertainty something we should worry about?
John Wyn Evans: Yes, I think there should be some concern. There are clearly rumblings in Labour. We saw a thinly veiled leadership launch from Angela Rayner last week. Andy Burnham hinted before and was pushed back. Wes Streeting is waiting in the wings. The catalyst is likely to be the May local elections, which look difficult for Labour. That could give the anti Starmer faction an opening to launch a challenge. That would undermine stability, and markets probably wouldn’t welcome any shift towards higher tax and spend policies.
Oliver Jones: This is why diversification is so important. Holding global equities, and UK companies with large overseas earnings, provides stability when domestic politics gets noisy. If you want to see what the market thinks about political risk — watch sterling. At the moment it’s holding up well, near the upper end of its post Brexit trade weighted range. Partly because Europe looks more vulnerable right now. But it’s still a useful litmus test.
Myron Jobson: I have a question about safe havens. Do you view utilities as a safe haven in these volatile times?
Oliver Jones: Utilities are interesting because they’re part of a broader theme we’ve discussed — resilience. Recent events in Iran, Ukraine, and the pandemic exposed vulnerabilities in Europe’s energy systems and grid infrastructure. That creates long term structural demand, from both governments and industry, to strengthen energy resilience. Utilities also connect indirectly to the AI theme — data centres are hugely power intensive, which pushes up demand for electricity infrastructure. It’s a sector traditionally seen as boring, but now quite interesting because it sits at the crossroads of several structural trends.
Myron Jobson: Gentlemen, really interesting insights. Thank you both for joining me. And yes — that brings us to the end of today’s session. A massive thank-you to Oliver and John for their insights, and to all of you for your thoughtful questions and for spending time with us. We hope you’re leaving with a clearer view of how recent geopolitical developments fit into the wider market picture, how portfolios are built to navigate uncertainty, and where opportunities may be emerging as conditions evolve. Before we wrap up, a quick reminder about upcoming webinars. First, we have a dedicated webinar on the Iran conflict this Thursday, the 26th of March. John will be joined by leading geopolitical and military experts to help make sense of this fast moving situation. You can register using the link on screen now. And if you've enjoyed today's session, register for our next Investment Insights webinar on Tuesday the 30th of June. Finally, please do take a moment to complete the feedback form — your comments genuinely help us improve and make these sessions as useful as possible. Thank you again for joining us. Until next time — take care, and happy investing.
