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A recent headline in Foreign Affairs sums up the collective market sentiment around China – “The End of China’s Economic Miracle”.

The Chinese stock market is on track to post negative returns for the third year in a row. This gloom has pushed share valuations to the bottom end of their historical range.

However, for those willing to look through this darkness, there could be opportunities on offer.

This article isn’t personal advice. All investments can rise and fall in value, so you could get back less than you invest. If you’re not sure whether an investment is right for you, ask for financial advice. Past performance isn’t a guide to the future.

The end of a 40-year boom

Deng Xiaoping became supreme leader of China in 1978, ushering in a series of pro-market reforms. This led to rapid economic development. Over the following four decades, China increased its income per head 25-fold, lifting more than 800mn people out of poverty.

The authorities opened the Shenzhen and Shanghai stock markets in 1990 and opened markets to foreign investors in 1992.

The government bond market welcomed foreign investors in 2010 and gradually made access easier.

These markets are huge – the largest countries in the MSCI Emerging Markets Index and the J.P. Morgan Emerging Markets Local Currency Government Bond Index.

However, over the last few years, a combination of drivers have slowed growth:

The working-age population peaked
A bubble in residential housing burst
Xi Jinping was appointed president for an unprecedented third term
Russia’s invasion of Ukraine led investors and politicians to reassess their relationships with China

1. Working population peaked

Going back to 1980, China introduced a one-child policy that was kept in place until 2016.

In practice, the number of children born to each woman averaged 1.7 in the first two decades of the millennium. But this decade birth rates have fallen to 1.2, following the global trend of having fewer children.

As a result, the population – and the working-age population – is expected to shrink over the next thirty years, while the population of over-65s increases. Naturally, fewer people means less economic activity.

2. Residential housing bubble burst

China underwent a housing boom, accounting for more than a quarter of economic activity in some years. Then the boom turned to bust in 2021. Figures are hard to come by, but an estimated fifth of city apartments were unoccupied in 2018.

The bust has hit property developers hard, with Evergrande – then the largest developer – defaulting on its debts. House price growth has also stalled. This impacts consumer sentiment and puts pressure on the finances of local governments, whose income is reliant on land sales.

China’s strong growth was being driven by high levels of investment – around 44% of Gross Domestic Product (GDP) between 2008 and 2021 compared to a global average of 25% and below 20% in the UK.

This investment was financed by high levels of savings. The flipside was that Chinese consumption made up only 38% of GDP, this being around two thirds in the US.

In 2007, premier Wen Jiabao said that the Chinese economy was “unstable, unbalanced, uncoordinated and unsustainable”. But little was done to rebalance the economy.

Excess investment has led to a fall in the returns on that investment. The profitability of state-owned enterprises is lower than privately owned assets. But investment in these firms has still risen year-on-year since 2015.

One reason that consumers save a high proportion of their income is that unemployment benefits and government funding for healthcare are relatively small.

The government could take measures to boost consumption, but we’ve seen little appetite for implementing policies that increase individuals’ freedom to make their own decisions.

3. Xi’s third term

For thirty years, China’s presidents were limited to serving two five-year terms.

In 2018 this limit was removed, and President Xi started his third term as leader earlier this year. With no signs of a future leader being groomed to take over, political analysts see signs that he intends to hold power indefinitely.

The history of third-term governments in emerging countries is not encouraging. Policy goals tend to shift towards sustaining power at the expense of the broader economy. Political appointments favour loyalty over expertise.

We’re seeing less and less economic data released. When the rate of graduate unemployment rose to worrying levels, they simply stopped publishing the data.

4. Russian invasion of Ukraine

The Russian invasion of Ukraine has led some investors to focus on China’s policy towards Taiwan. President Xi has said that “reunification” with the island “must be fulfilled”, and he hasn’t ruled out the use of force to do it.

After the sanctions imposed on Russia, some investors are growing increasingly concerned of losing access to their assets. Companies have also become more cautious about investing in China.

Google announced it will make its smartphones in India and on the political front, there’s growing tension with the US and its allies.

The full picture is summed up in economists’ forecasts for the next decade. The International Monetary Fund (IMF) expects growth to be below 4% over the next few years, less than half its recent record. Capital Economics, an independent research firm, sees growth falling to 2% by 2030.

Where are the opportunities?

There are reasons for optimism.

The key positive is that – with so much pessimism around – Chinese shares are trading at valuations lower than their historical average. We think investors have readjusted their expectations for the country. And low valuations are typically associated with higher future returns, although of course there are no guarantees.

While economic growth has slowed, it’s still expected to exceed that in the developed world for years to come. The potential for catch up is still there. Other economies, like Korea and Taiwan, have recovered from the sort of crisis that China is experiencing today.

In the shorter term, the government has boosted spending to try and reverse the downtrend. And the central bank has cut interest rates. With consumer prices falling 0.2% year-on-year in October, the authorities aren’t constrained by the need to tackle inflation.

Economic dynamism is clear in many companies and sectors of the economy.

Chinese auto manufacturers are global leaders in electric vehicles. The technology sector is benefiting from government support. This type of industrial policy was an ingredient in the success of the sector in the US, Korea and Taiwan. The potential for China is visible in its world-leading rate of applications for patents.

The structural shift to a lower growth is real. But so is the fact that markets are driven by emotions and fundamentals.

Valuations at 20-year lows is a good measure of where sentiment is today. This suggests that there are opportunities for investors willing to look through the gloom.

Fund Insight: our weekly email

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We look at government and corporate bond markets, interest rates and what the changing outlook means for investors.","publishedDate":"2026-11-05","categories":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2iCwlDaXowfjIF3WIQcu1Q","type":"Entry","createdAt":"2024-02-14T16:10:28.211Z","updatedAt":"2024-03-04T10:31:40.764Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":13,"revision":3,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"category"}},"locale":"en-US"},"fields":{"titleAndPath":"Investing insights [@ news/investing-insights]","parentCategory":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"46JnZAsE00ZTEc8CUaO13x","type":"Entry","createdAt":"2023-10-25T09:06:18.192Z","updatedAt":"2024-02-09T14:38:43.028Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":15,"revision":7,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"category"}},"locale":"en-US"},"fields":{"titleAndPath":"Investment ideas [@ news/investment-ideas]","mobileCategoryId":"investmentIdeas"}}}},"$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":false,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"HU5zNAdU4Tvv89yf89iqO","type":"Entry","createdAt":"2026-11-05T10:08:21.574Z","updatedAt":"2026-11-05T10:08:21.574Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":6,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The bond market has been action-packed over recent weeks. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Global government bond yields have hit multi-year highs, pushing bond prices lower. The yield premium on corporate bonds has increased. Some of the leaders in artificial intelligence (AI) have raised billions to fund their investments. French government bonds have been hit hard relative to their euro area neighbours. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"All of this has led to a spike in volatility. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In Goldfinger, James Bond asks the eponymous villain, “Do you expect me to talk?” and in markets at least, bonds have had plenty to say. We’re looking at what these markets are telling us about the outlook, although past performance is not a guide to future returns. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What’s driving bond yields higher?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We can break down government bond yields into three components: ","marks":[],"data":{}}]},{"nodeType":"ordered-list","data":{},"content":[{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The real yield that investors expect – that’s the yield adjusted for inflation.","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Inflation expectations of investors.","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The term premium – the extra yield that investors demand for holding long-term bonds over shorter-dated securities as compensation for their additional risk.","marks":[],"data":{}}]}]}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US government bond market typically sets the tone for global markets. Over recent weeks, the term premium and long-term expectations have been pretty stable. So, we think the increase in yields is mostly explained by an increase in the real yield as investors have raised their expectations for the path of interest rates set by the US Federal Reserve, the central bank. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We see both growth and inflation data contributing to expectations of rate rises. Economic growth has been surprisingly resilient in the face of persistently high oil prices. The Atlanta Fed GDPNow estimate for third-quarter growth is 3.6%. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"And inflation is running more than a full percentage point above the target level, at 3.4%. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"A longer view","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The yield on a ten-year US Treasury bond has risen from under 1% in 2020 to over 5% today. Is this an opportunity?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Over the long term, there’s a link between the 10-year bond yield and long-run nominal GDP growth. This makes sense if you think about the bond yield being a measure of the cost of capital and GDP growth as a measure of return on that capital. And, in practice, both the US 10-year bond yield and US nominal GDP have averaged close to 6% over the last 50 years. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We think that real GDP growth will be around 2% over the next decade and the inflation target is also 2%, which – as a very crude measure – would suggest a 4% bond yield could be appropriate as a long-term equilibrium rate. But the key point is that a yield close to 5% today is somewhere in the range of 4-6% – neither wildly expensive nor obviously cheap. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We think the big structural shift up in yields, from the low rates of the long decade between the financial crisis and the COVID crisis, is behind us.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Inflation expectations stable","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US-Iran war has led to a jump in the price of oil, pushing up consumer price inflation. With this coming after the COVID crisis and the Russian invasion of Ukraine, inflation has been running above target for over five years now.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, what matters for investors in 10-year bonds is the expected inflation over the next 10 years. The good news here is that expectations have been well anchored, mostly staying between 2.2% and 2.5% since late 2024.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"High yield spreads widening","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"While the overall economy has proved resilient in the face of soaring oil prices and higher bond yields, that’s not true for everyone. Yields on the bonds of the weakest borrowers have soared to their highest level since 2022. These are the companies that are least able to cope with higher borrowing costs.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The yield premiums for investment grade corporate bonds have increased too but remain low compared to historical averages.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"French-German spreads soaring","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The riots across France have been echoed in a violent surge in French government bond yields. Government debt levels are uncomfortably high at 117% of GDP and tackling this requires making unpopular decisions. The presidential elections due in April 2027 are creating uncertainty. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Candidates from the extremes are performing strongly in opinion polls. Far-left candidate Jean-Luc Melenchon has suggested that France could take bonds held by the central bank and “throw them in the fire”. Far-right candidate Marine Le Pen has proposed big tax-and-spend policies that would push public borrowing higher. We would expect success by either candidate to be taken negatively by bond markets.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In Denmark, where debt to GDP is only 27%, they raised the retirement age to 70 this month. Meanwhile, candidates in the French election are campaigning on cutting retirement age from 62 to 60. And, while students protest about the lack of investment in their schooling, nearly one third of the current spend on education budget is used to fund pensions.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Hyperscalers issuing ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The race to become a winner in the AI race has seen some of the world’s largest companies come to the bond market. The likes of Alphabet, Amazon, Meta and Microsoft are raising funds to invest in the computing power, data centres and infrastructure needed to be an AI leader. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"These long-dated bonds are increasing the interest sensitivity of bond indices. They also reduce the diversification benefits for investors looking to protect their portfolios from the risk of an AI bubble bursting.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Higher volatility means greater uncertainty","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Together, these developments have led to an increase in volatility in bond markets. Higher volatility means a wider range of potential outcomes – for borrowers and investors. This discourages investments funded through the bond market and is therefore negative for growth.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Investment outlook","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US government bond market offers investors an attractive yield, even after adjusting for inflation. What’s more, with yields well above their 2022 lows, they could rise nearly another percent from here and investors would still end up with a positive return over the coming year. The same is true for UK gilts.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The additional yield on offer from corporate bonds is relatively modest by historical standards but they remain attractive as long as the economy remains resilient.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Government bonds performed strongly when equities suffered over much of the last thirty years. However, that has not been the case since the COVID crisis, with a series of supply shocks pushing up inflation, hitting bond and equity markets in tandem. Still, we expect government bonds to continue to offer protection in the case of an economic slowdown.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Concerns about high levels of government borrowing are not limited to France. Debt levels are high and rising across much of the developed world. This means we expect the term premium – the extra return that investors demand for buying long-dated bonds – to continue to trend higher over the long term.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Back to Goldfinger. Bond asks. “Do you expect me to talk?” Goldfinger’s famous reply, “No, Mr Bond. I expect you to die.” Our message? We expect you to diversify.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"\n","marks":[],"data":{}},{"nodeType":"text","value":"This article is for information only and not personal financial advice. Investing can help your money grow, but the value of investments can rise and fall, so you could get back less than you put in. Yields are variable and not a reliable indicator of future income. Investing is for the long term, typically 5 years or more.","marks":[{"type":"italic"}],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If you’re not sure whether investing is right for you, a financial adviser can help.","marks":[{"type":"italic"}],"data":{}}]}]}}}],"authors":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7rgC0kjnRUOjmTOvPGxOtO","type":"Entry","createdAt":"2023-12-20T11:32:06.719Z","updatedAt":"2026-11-11T16:23:46.298Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":124,"revision":11,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"author"}},"locale":"en-US"},"fields":{"titleAndPath":"Robert Farago [@ robert-farago]","profileImage":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"15vZgaiIhZGJIaeN0Y0UIu","type":"Asset","createdAt":"2024-02-16T21:55:09.436Z","updatedAt":"2024-02-16T21:55:09.436Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"locale":"en-US"},"fields":{"title":"Robert Farago profile.jpg","file":{"url":"//images.hl.uk/vvl3z0p6qtad/15vZgaiIhZGJIaeN0Y0UIu/737c07675744fb3a5a0c588e45f07a08/Robert_Farago_profile.jpg","details":{"size":3354713,"image":{"width":2996,"height":2802}},"fileName":"Robert Farago profile.jpg","contentType":"image/jpeg"}}},"name":"Robert Farago","role":"Head of Strategic Asset Allocation","shortBio":"Robert worked with experts across the business to set our asset allocation strategies for clients across HL. 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[@ is-the-ai-boom-a-bubble]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"Are we in an AI bubble? We break down the warning signs, market trends and what it means for investors and portfolio strategy.","publishedDate":"2026-07-20","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":true,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2Xox36mwskzvrXKLozZzv5","type":"Entry","createdAt":"2026-07-20T10:12:02.533Z","updatedAt":"2026-07-20T10:12:02.533Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":13,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A handful of stocks have enjoyed spectacular performance – those seen as the main winners of the rapid rise of artificial intelligence (AI). This has led investors to question whether we are in a bubble. We look at the evidence and say what it means for investors.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article is for information only and not personal financial advice. If you’re not sure what’s right for you, a financial adviser can help.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Definition of a bubble","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Before debating whether we are in a bubble, we need to know what one is. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A classic definition is an ‘upward price movement over an extended range that then implodes’. While it’s hard to disagree with this definition, it means we have to wait for the implosion before confirming we were in one. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Prize-winning economist Eugene Fama offered a more practical definition in his Nobel Lecture: ","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4m9pmJ0xE8H0XXIhHaW7xd","type":"Entry","createdAt":"2026-07-20T10:12:02.547Z","updatedAt":"2026-07-20T10:12:02.547Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockQuote"}},"locale":"en-US"},"fields":{"text":"an “irrational strong price increase that implies a predictable strong decline.” ","underline":false,"position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"84XTKxrrOpn0wmwHocDtL","type":"Entry","createdAt":"2026-07-20T10:12:02.558Z","updatedAt":"2026-07-20T10:12:02.558Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"As a pioneer of the efficient market hypothesis, he then rejected the very idea of bubbles on the basis that the declines are unpredictable.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But this certainly hasn’t persuaded everyone they are a mirage.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Ingredients of a bubble","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Authors William Quinn and John D. Turner set out the ingredients of a bubble in Boom and Bust: A Global History of Financial Bubbles. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In an investment bubble – whether the 1720 South Sea Bubble or the 2000 dotcom boom – euphoria spreads like fire. And a fire requires three ingredients: ","marks":[],"data":{}}]},{"nodeType":"unordered-list","data":{},"content":[{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"fuel ","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"oxygen ","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"heat – plus a spark.","marks":[],"data":{}}]}]}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In a bubble, the fuel is easy money, or low interest rates. The oxygen is marketability, making it easy to trade. Heat is provided by speculators who spin stories to attract novice investors. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The spark? A new technology heralding unimaginable progress – trains in 1844, the internet in the late 1990s, and AI today. Or it could be government policy – encouraging low-income buyers in housing bubbles in the US, Ireland, Spain and the UK earlier this century. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"A bubble checklist","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Bubbles are a popular hunting ground for academic research. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"What’s agreed is that strong returns alone do not predict future crashes. Nor is there a magic formula for spotting bubbles and knowing when they’ll burst. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But there are clues to let investors know that we’ve potentially entered bubble territory. One study looked at 40 episodes from around the world and found these common features.","marks":[],"data":{}}]},{"nodeType":"unordered-list","data":{},"content":[{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Increased stock volatility","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"New stock issuance","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"High valuations","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Disproportionate price rises from new companies","marks":[],"data":{}}]}]}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Bubble stories","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"While academics tend to focus on the numbers, stories matter too. The classic tale is that of Joseph Kennedy Senior, who was working as a stockbroker in 1929. When he heard a shoeshine boy offer stock tips, he figured that the boom was about to end. He sold his holdings and went short on the market, making a fortune as the Wall Street Crash unfolded.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Readers of the Wall Street Journal recently shared their stories of more recent events. No shoeshine boys, but tips and hints from gardeners, janitors, mechanics and strippers, acting as omens of the dotcom bust and the Global Financial Crisis. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For one reader, the sell signal was a visit to his local bar, the night before a big game. The regulars had switched from the sports channel to the business news.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"At the height of the dotcom bubble, 95 listed companies added dotcom, dotnet or internet to their name. The impact? An average of a 74% increase in share price over the ten days before and after the name change.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In April this year, shoe manufacturer Allbirds announced it would shift to becoming an “AI compute infrastructure” company, renamed itself NewBird AI, and saw its share price rise over 500%. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"So, is it a bubble?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"As an investor who managed funds through the Asian Financial Crisis, the dotcom boom and bust, and the Global Financial Crisis that was triggered by the sharp rise and fall in US house prices, I do believe in bubbles.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The AI story provides the fertile ground needed for a bubble to grow: a transformational technology with unknown winners. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The market today ticks a couple of the items on the checklist above too. The best performing stocks have seen rising volatility. The IPO of SpaceX raised billions from retail investors – and institutions too. It’s said Anthropic and OpenAI are planning to follow soon.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The valuation picture is a little more mixed, with ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/price-to-earnings-ratio"},"content":[{"nodeType":"text","value":"price-earnings ratios","marks":[],"data":{}}]},{"nodeType":"text","value":" well above average but below those seen at the peak of the dotcom boom, helped by rapid earnings growth. And Nvidia, Microsoft, Apple and Alphabet, whose share prices have soared, have been around for decades now. Although, past performance is not a guide to future returns.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Also, knowing you’re in a bubble is very different from profitably trading one. Economist Robert Shiller, who collected his Nobel Prize on the same day as Eugene Fama, warned that stock prices were irrationally exuberant in 1996. The US market went on to double and only peaked in 2000. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"So, my judgement is that we may well be in bubble territory. It could be in its early stages, or it could be about to burst. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Therefore, I continue to suggest a ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/diversification"},"content":[{"nodeType":"text","value":"diversified portfolio","marks":[],"data":{}}]},{"nodeType":"text","value":" – balancing any investments in the potential AI winners with those from the wide range of stocks that have been left behind over the last few years. Investing can help your money grow, but the value of investments can rise and fall, so you could get back less than you put in. Investing is for the long term, typically 5 years or more.","marks":[],"data":{}}]}]}}}],"authors":["$10:props:data:authorArticles:0:fields:authors:0"],"newsLetterSignUp":"$10:props:data:authorArticles:0:fields:newsLetterSignUp","editor":"$10:props:data:authorArticles:0:fields:editor","dropCap":"Standard","metadata":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2ZlsOLWVKmILkQU6VhnQfz","type":"Entry","createdAt":"2026-07-20T10:12:02.573Z","updatedAt":"2026-07-20T10:12:02.573Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"pageMetadata"}},"locale":"en-US"},"fields":{"seoTitleTag":"Is the AI boom a bubble? | Hargreaves Lansdown","seoMetaDescription":"Are we in an AI bubble? 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[@ american-exceptionalism-will-us-stocks-keep-outperforming]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"US stocks have led global markets for years. As the US nears its 250th birthday, can this exceptionalism continue, or will valuations, AI and the dollar change the outlook?","publishedDate":"2026-07-03","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":true,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5IGAF93YiAeGjOXzv49dyd","type":"Entry","createdAt":"2026-07-03T10:36:33.442Z","updatedAt":"2026-07-03T10:36:33.442Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/stock-market"},"content":[{"nodeType":"text","value":"stock market","marks":[],"data":{}}]},{"nodeType":"text","value":" has outperformed the rest of the world since 2009, the end of the global financial crisis. The US economy has also outpaced the rest of the developed world. And the US dollar gained against its major trading partners. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"So as the US heads into its 250","marks":[],"data":{}},{"nodeType":"text","value":"th","marks":[{"type":"superscript"}],"data":{}},{"nodeType":"text","value":" birthday, should investors expect the US to sustain this lead?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article is for information only and not personal financial advice. If you’re not sure what’s right for you, a financial adviser can help.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What’s driven US stock market outperformance?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The recent strength of US stocks was triggered in part by the launch of ChatGPT in 2022. This led to the surge in the Magnificent Seven – the technology companies seen as benefitting most from the potential of AI. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, the outperformance goes back much further. The UBS Yearbook tracks the performance of 23 global stock markets back to 1900 – and the US led the pack. Over this 125-year history, the US – already the world’s leading economy – has risen to become the dominant stock market, while the US dollar has become the world’s reserve currency.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Still, the US stock market has not always outperformed. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"It lagged the broader global stock market in the 1970s as US ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":" soared, in the 1980s when the soaring Japanese stock market briefly took the role of the world’s largest stock market, and in the 2000s, as emerging markets surged. On a longer-term view, the US market fell 89% from its 1929 peak to the trough in 1932, triggering the Great Depression.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"To assess whether this recent outperformance will continue, it helps to dig deeper into what drove the rally since 2009. And we consider two scenarios – what would have to happen over the next ten years for the US to underperform and outperform. Remember though, past performance is not a guide to future returns.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Decomposing historical outperformance","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Antti Ilmanen at fund manager AQR has written three books on what returns investors should expect. He studied the historical outperformance of the US versus the rest of the world from 1980 to 2025 of 2.5% a year. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"He breaks it down into three components: earnings growth, ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/dividends"},"content":[{"nodeType":"text","value":"dividend","marks":[],"data":{}}]},{"nodeType":"text","value":" yield, and the change in share price valuations. He looks at hedged returns, which removes the currency effect.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Over this 45-year period, US earnings outpaced those in the rest of the world by 0.8% per annum.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The difference in returns from company dividends was close to zero.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The impact of a change in valuation was 1.8% per annum. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"So, the outperformance can be partially explained by better corporate earnings growth. But around two thirds of the difference was due to an increase in relative valuations – the US market has become more expensive compared to the rest of the world.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The picture since 2010 is even more stark. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"US stocks outperformed by 5% per annum. US earnings per share grew 2.4% a year faster but the contribution of dividends was -1.2%. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"US companies have increased their use of ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=Share%20Buybacks,as%20share%20repurchases."},"content":[{"nodeType":"text","value":"share buybacks","marks":[],"data":{}}]},{"nodeType":"text","value":" over this period, which boosts earnings per share growth but means that less of these earnings are paid back to shareholders in the form of dividends. The effect of an increase in valuations was a huge 3.8% per annum.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The view from the future","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We can better understand the risks in our investments by thinking through possible futures. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If we look back in a decade’s time and find the US has underperformed the rest of the world, what are the likely reasons why?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We see the most likely reason as being a fall in relative valuations. The cyclically-adjusted price-earnings ratio for the US stock market – a measure that looks at the last 10 years of earnings – is 39.6, a level only exceeded in 1999/2000 at the height of the internet bubble. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"So, a fall in valuations towards the long-term average would not be a surprise.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"US corporate profits as a share of the economy are also at high levels and a falling profits share would also weigh on stock returns.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US dollar is expensive against its global peers based on purchasing power. A fall in the currency would also weigh on returns for UK based investors.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"And if the US has outperformed, what will we see in the rear-view mirror?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The massive investment in artificial intelligence (AI) capabilities currently underway by the leading US tech companies might have paid off. Current valuations might have been justified if AI delivers significant increases in productivity that powers stronger economic growth, earnings growth and sustained high profitability – outpacing the gains across the rest of the world.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"So which future should investors expect? ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In reality, we simply cannot know. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Some investors may hold a strong view either way and may position their portfolios in a way to take advantage. But in general, we always recommend ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/diversification"},"content":[{"nodeType":"text","value":"diversifying","marks":[],"data":{}}]},{"nodeType":"text","value":" across global markets – including the US.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Investing can help your money grow, but the value of investments can rise and fall, so you could get back less than you put in. Investing is for the long term, typically 5 years or more.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1cfuTfOnol6xnVIBk2si8L","type":"Entry","createdAt":"2026-07-03T10:36:33.462Z","updatedAt":"2026-07-03T10:36:33.462Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"internalTitle":"Related article","image":false,"position":"Inline"}}],"authors":["$10:props:data:authorArticles:0:fields:authors:0"],"editor":"$10:props:data:authorArticles:0:fields:editor","dropCap":"Standard","metadata":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5ymWS1AZHGSJBxorkKR9WP","type":"Entry","createdAt":"2026-07-03T10:36:33.488Z","updatedAt":"2026-07-03T10:36:33.488Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"pageMetadata"}},"locale":"en-US"},"fields":{"seoTitleTag":"American exceptionalism – will US stocks keep outperforming? | Hargreaves Lansdown","seoMetaDescription":"US stocks have led global markets for years. 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And yet the US ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/stock-market"},"content":[{"nodeType":"text","value":"stock market","marks":[],"data":{}}]},{"nodeType":"text","value":" has soared to new highs, with the UK and global markets marching upwards in tandem.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Remember though, past performance is not a guide to future returns. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The pre-COVID pattern","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"After the inflation shocks of the 1970s, the four decades between 1980 and 2020 were characterised by a downward trend in inflation. This allowed global central banks to cut ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/base-interest-rate"},"content":[{"nodeType":"text","value":"interest rates","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This provided a positive backdrop for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bonds"},"content":[{"nodeType":"text","value":"bond","marks":[],"data":{}}]},{"nodeType":"text","value":" investors. Stocks gained too as earnings trended higher. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The gains didn’t happen at the same time: when stocks went up, bonds usually went down – and vice versa. But sometimes bad news for earnings could be good news for stocks too. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"When the economy slowed and analysts cut their expectations for earnings, they also cut their expectations for interest rates. Lower rates translate into higher valuations, providing some support for stock prices even as earnings came under pressure. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Of course, this was not the whole story. These four decades also included the 1997 Asian financial crisis, the bursting of the dotcom bubble in 2000, and the global financial crisis of 2007-09. But, over the full 40 years, investors made strong gains in both stocks and bonds.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Then came TINA ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The COVID-19 crisis led to supply disruptions and worries about ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/recession"},"content":[{"nodeType":"text","value":"recession","marks":[],"data":{}}]},{"nodeType":"text","value":". A sharp rise in government spending followed. So too did inflation. Indeed, US inflation rose above the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/federal-reserve"},"content":[{"nodeType":"text","value":"Federal Reserve’s","marks":[],"data":{}}]},{"nodeType":"text","value":" 2% target in March 2021 and has not dropped back below that for 62 straight months since.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Sticky inflation and rising government debt has been bad news for bond investors. Stocks were hit too as inflation soared. The relationship between stocks and bonds changed and now they often rise and fall together.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Yet stocks not only recovered, but they also powered on to new highs. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Rising earnings is the most obvious explanation. But the other factor is that investors came to believe that There Is No Alternative – or TINA. With government debt forecast to rise for the foreseeable future, it’s harder to make a case for bonds.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Risk free?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If TINA is one explanation for what’s happened, it’s not a strategy we recommend – except for investors with the highest tolerance for risk and the longest timeframe. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Stock investors should expect a higher return in recognition of the higher risk they face. Stocks typically suffer when recessions hit, pushing down earnings. Valuations typically fall when inflation rises above target levels. And they might fall in any case given their elevated levels, particularly in the US technology sector. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"There are certain assets and strategies that can offer some protection against inflation – gold, value stocks and real assets such as real estate. But we find that none of these are guaranteed to succeed when most needed.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For most investors, we suggest the best protection against inflation is a combination of stock investments and a sufficiently long investment horizon – typically 5 years or more – long enough to see through the initial negative impact of rising prices. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Investing can help your money grow, but the value of investments can rise and fall, so you could get back less than you put in. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Stocks are not a hedge against inflation. Instead, they offer above inflation expected returns for long term investors. But bonds still have a role to play. They provide a secure income, and government bonds can protect investors when a recession hits.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article is for information only and not personal financial advice. If you’re not sure what’s right for you, a financial adviser can help.","marks":[],"data":{}}]}]}}}],"authors":["$10:props:data:authorArticles:0:fields:authors:0"],"newsLetterSignUp":"$10:props:data:authorArticles:0:fields:newsLetterSignUp","editor":"$10:props:data:authorArticles:0:fields:editor","dropCap":"Standard","metadata":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"45VVOm2U2xBfCflnsf9gDE","type":"Entry","createdAt":"2026-07-01T10:41:21.742Z","updatedAt":"2026-07-01T10:41:21.742Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"pageMetadata"}},"locale":"en-US"},"fields":{"seoTitleTag":"Why markets keep rising despite bad economic news | Hargreaves Lansdown","seoMetaDescription":"Why do stocks rise when economic news is poor? 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Discover how materials, energy and infrastructure are driving returns in 2026.","publishedDate":"2026-04-24","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":true,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4b1yQ6tWqaJMd8x8OUfB38","type":"Entry","createdAt":"2026-04-24T11:08:57.260Z","updatedAt":"2026-04-24T11:08:57.260Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"As investors, we seem to live in a world driven by intangible investments – artificial intelligence (AI) hyperscalers, brand values, and research & development successes and failures. But 2026 has seen a shift in market leadership, driven by the “halo effect” – the outperformance of heavy asset, low obsolescence companies. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"First, obsolescence fears hit. The launch of the latest iteration of Claude’s AI solution for corporates led investors to derating a number of software and data companies – those whose business models used to be seen as impervious to competition.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Then the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/news/middle-east-crisis"},"content":[{"nodeType":"text","value":"Iran War","marks":[],"data":{}}]},{"nodeType":"text","value":" led to the closure of the Strait of Hormuz, limiting the supply of oil and gas and boosting the share price of its producers. And the shortages are wider, from fertilizers to the helium used in the manufacturing of computer chips.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The massive investment in AI capabilities is boosting demand for heavy assets too – the data centres needed to house the chips and the electricity generation plants needed to power them.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. All investments fall as well as rise in value, so you could get back less than you invest. If you’re not sure what’s right for you, ask for financial advice.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Material World: A Substantial Story of our Past and Future","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Back in 2023, I met with Ed Conway, Economics and Data Editor of Sky News, to talk about his book, ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.penguin.co.uk/books/446267/material-world-by-conway-ed/9780753559154"},"content":[{"nodeType":"text","value":"Material World: A Substantial Story of our Past and Future","marks":[],"data":{}}]},{"nodeType":"text","value":". ","marks":[{"type":"italic"}],"data":{}},{"nodeType":"text","value":"In this book, Ed shows that we are uncomfortably reliant on these six materials.","marks":[],"data":{}}]},{"nodeType":"unordered-list","data":{},"content":[{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Sand – for glass, concrete and silicon chips","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Salt – for fertilisers and pharmaceuticals ","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Iron – for the steel in just about every structure around us","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Copper – for conducting electricity ","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Oil (and gas) – for power, and ","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Lithium – the lightest metal, for electric cars and our portable devices","marks":[],"data":{}}]}]}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Ed takes us on a fascinating journey, across history and geography, from the earliest users of these materials to the factories making the chips for AI. When you read the book, you will learn about the UK salt factory that predates Stonehenge, the world's flattest mirror – used to make those AI chips – and why the Middle East imports sand from the UK. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In the meantime, here are the six themes that will impact investors over the decade ahead.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2TeZm1A3BPlm7rF8bykFS","type":"Entry","createdAt":"2026-04-24T11:08:57.278Z","updatedAt":"2026-04-24T11:08:57.278Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHeading"}},"locale":"en-US"},"fields":{"headingTitle":"Scale","headingNumber":1,"heading":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Scale","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"16EjhPdD77nGX8l64zOOSC","type":"Entry","createdAt":"2026-04-24T11:08:57.294Z","updatedAt":"2026-04-24T11:08:57.294Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The inspiration for the book was a visit to a Nevada gold mine. Here, trucks are bigger than three-storey buildings, with tyres the size of a double-decker bus. They must shift rocks the weight of ten fully laden Airbus A380s, the world's biggest passenger plane, to produce one bar of gold.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Ernie Berg of (what is now) Chevron discovered Saudi Arabia’s Gharwar oil field in 1940. The field measures 175 by 19 miles and has produced more than 70 billion barrels of oil, with around 50 billion more still underground. Even today, it’s on a different scale to any other oilfield on the planet.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Middle East is home to 40% of the world's gas reserves. Qatar's North Field alone (stretching into Iran) produces around 4% of the world's total energy from all sources – gas, coal, nuclear, wind etc.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Chuquicamata copper mine in Chile has created the world's largest manmade hole. It’s longer and wider than New York’s Central Park, and deeper than the height of the Burj Khalifa in Dubai. It has been mined for over 100 years. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"“In 2019, we mined, dug and blasted more materials from the earth’s surface than the sum of the total of everything we extracted from the dawn of humanity all the way through to 1950.” And in the coming decades, we are likely to extract more than ever before.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2gbqzXimyL45Vh18XGSdMV","type":"Entry","createdAt":"2026-04-24T11:08:57.309Z","updatedAt":"2026-04-24T11:08:57.309Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHeading"}},"locale":"en-US"},"fields":{"headingTitle":"The fifth energy transition","headingNumber":2,"heading":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The fifth energy transition","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"3AoHr4v60Dzphiz9akiVM1","type":"Entry","createdAt":"2026-04-24T11:08:57.324Z","updatedAt":"2026-04-24T11:08:57.324Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Over the last few hundred years, we have been through four energy transitions – from burning wood, to coal, to oil, and increasingly to gas. 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And cyber security is an ongoing threat to individuals, businesses and governments.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2vub5FogpFaAeM5ZGlrFJA","type":"Entry","createdAt":"2026-03-25T16:46:01.484Z","updatedAt":"2026-03-25T16:46:01.484Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHeading"}},"locale":"en-US"},"fields":{"headingTitle":"Economic risk","headingNumber":5,"heading":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Economic risk","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4MYFglORUBSWZoN59VuTKS","type":"Entry","createdAt":"2026-03-25T16:46:01.498Z","updatedAt":"2026-03-25T16:46:01.498Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The final risk for survey participants is arguably the top risk for investors in the immediate future – an economic downturn. We see many of the risks above as having the potential to trigger a recession. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4qqYA9nvCaVVCd4m9n5J8L","type":"Entry","createdAt":"2026-03-25T16:46:01.514Z","updatedAt":"2026-03-25T16:46:01.514Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Investing = risk-taking","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Investing is all about taking – and managing – risks. Investors in the stock market expect a return above cash as a reward for taking on this risk. We encourage our clients to take a long-term view when investing so they can ride through the inevitable downturns in markets when these risks are realised. Today, a recession may be a possibility. But, if a downturn occurs, an eventual economic recovery is an inevitability – and so too is an associated stock market rally.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Do macro shocks matter?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A recent study by the US’s National Bureau of Economic Research found that the probability of macro shocks altering the course of the economy over the long term was less than one percent. 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And what difference will a volatile oil price have?","publishedDate":"2026-03-13","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory","$10:props:data:authorArticles:5:fields:categories:2"],"featureArticle":true,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5I9D7dmVUtyGCx1ghD7FNG","type":"Entry","createdAt":"2026-03-13T15:39:56.714Z","updatedAt":"2026-03-13T15:39:56.714Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Since the Global Financial Crisis of 2008, ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/base-interest-rate"},"content":[{"nodeType":"text","value":"interest rates","marks":[],"data":{}}]},{"nodeType":"text","value":" have moved broadly in tandem across developed economies. But now we expect diverging economic outlooks to drive interest rates in different directions. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"What will this mean for investors and how will the spike in oil prices change the picture?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. Past performance isn’t a guide to the future. 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Central banks responded by cutting interest rates – in some cases even into negative territory.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The COVID-19 crisis triggered a combination of supply disruptions and a big increase in government spending, which caused inflation to spike. A synchronous rise in global interest rates followed.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Then inflation peaked in 2022 and interest rates have gradually trended lower since.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"…to divergence","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The picture today is more complex. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Here in the UK, inflation remains stubbornly above the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bank-of-england"},"content":[{"nodeType":"text","value":"Bank of England’s","marks":[],"data":{}}]},{"nodeType":"text","value":" 2% target. And the same is true in America. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"By contrast, inflation in the euro area returned to target levels in 2025 and interest rates were cut to just above 2%. In Japan, after nearly three decades of near-zero inflation, persistent price rises are now putting upward pressure on the central bank to raise rates – which are still below 1%. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Beyond the developed world, China is pursuing an export-led growth strategy. This is putting downward pressure on the price of manufactured goods around the world. The notable rise in China’s car exports has both political and economic implications.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Reserve Bank of Australia raised rates in January due to inflation concerns, joining Japan as the only other developed market central bank to reverse the downtrend in place since inflation peaked.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Looking forward","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We expect the Bank of England and the US ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/federal-reserve"},"content":[{"nodeType":"text","value":"Federal Reserve","marks":[],"data":{}}]},{"nodeType":"text","value":" to cut rates in 2026 as inflation trends back towards target levels. We see the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=European%20Central%20Bank,called%20the%20Eurozone."},"content":[{"nodeType":"text","value":"European Central Bank","marks":[],"data":{}}]},{"nodeType":"text","value":" remaining on hold, with the potential for rate rises next year. And we expect the Bank of Japan to raise rates, with the current interest rates well below the rate of inflation.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, the current spike in oil prices may force us to revise these views. Indeed, the market has put on hold its expectations for the next rate cut by the Bank of England. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Higher oil prices affect the economy in two ways. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Most obviously, it drives up the price that consumers pay for petrol – pushing inflation higher. But it also acts as a tax on the economy, leaving consumers with less money to spend on other goods, which puts downward pressure on the prices of these goods. This tax on consumption can lead to ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/recession"},"content":[{"nodeType":"text","value":"recessions","marks":[],"data":{}}]},{"nodeType":"text","value":". We will be watching consumer confidence as a first signal of any slowdown.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Market implications","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bonds"},"content":[{"nodeType":"text","value":"Bond","marks":[],"data":{}}]},{"nodeType":"text","value":" yields are forward looking, embedding the expected moves in central bank rates. Therefore, a cut in interest rates does not guarantee lower bond ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/yields"},"content":[{"nodeType":"text","value":"yields","marks":[],"data":{}}]},{"nodeType":"text","value":". They also price in a term premium – the extra compensation that investors expect for holding a more volatile long-term investment instead of cash. The drivers of this term premium can be different to the drivers of short rates.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Foreign exchange markets also embed expectations – and so are driven by surprises. If the Bank of England cuts rates more than expected, we’d expect the pound to fall. If rates surprise us by rising, we’d expect the pound to rise too.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"3LshdBWYetPQSRtwUKOrR6","type":"Entry","createdAt":"2026-03-13T15:39:56.779Z","updatedAt":"2026-03-13T15:39:56.779Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":6,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"internalTitle":"Related article ","image":false,"position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4RJIge2BKKaL6UHpn1casp","type":"Entry","createdAt":"2026-03-13T15:39:56.812Z","updatedAt":"2026-03-13T15:39:56.812Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We would expect central banks to look through a temporary shock to inflation due to higher oil prices. A prolonged supply disruption would put central banks in a difficult situation though, as it increases the risks of both persistent inflation and a recession. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This “","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=Stagflation,to%20an%20economy."},"content":[{"nodeType":"text","value":"stagflation","marks":[],"data":{}}]},{"nodeType":"text","value":"” is a bad outcome for investors. The only good news is that the global economy is less energy dependent than in the 1970s – the last time there was a period of significant stagflation and a challenging time for investors.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Profiting from correctly predicting policy surprises is hard. Instead, we advise investors to ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/diversification"},"content":[{"nodeType":"text","value":"diversify","marks":[],"data":{}}]},{"nodeType":"text","value":" their portfolios, making them more robust to policy shocks. Spreading exposures across different countries and currencies has the potential to reduce the volatility of returns.","marks":[],"data":{}}]}]}}}],"authors":["$10:props:data:authorArticles:0:fields:authors:0"],"newsLetterSignUp":"$10:props:data:authorArticles:0:fields:newsLetterSignUp","dropCap":"Standard","metadata":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"34rLvGDSi6T8m7LUZRQscg","type":"Entry","createdAt":"2026-03-13T15:39:56.828Z","updatedAt":"2026-03-13T15:39:56.828Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"pageMetadata"}},"locale":"en-US"},"fields":{"seoTitleTag":"Changing rates and the oil price – what to expect from interest rates? | HL","seoMetaDescription":"Global interest rates have moved together for years, but what’s happening now that they’ve started to diverge? 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We’re looking back over a full century of UK currency crises and what might happen in 2026.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. Past performance isn’t a guide to the future. If you’re not sure what’s right for you, ask for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/financial-advice/investment-advice"},"content":[{"nodeType":"text","value":"financial advice","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4TCWrthNjZeZbh1rUDEvlI","type":"Entry","createdAt":"2026-02-04T16:30:39.645Z","updatedAt":"2026-02-04T16:30:39.645Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":8,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockStandOutFigure"}},"locale":"en-US"},"fields":{"text":"1717 – 1914 ","position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2Mc2KVjBjsqsXZoyC7b933","type":"Entry","createdAt":"2026-02-04T16:30:39.666Z","updatedAt":"2026-02-04T16:30:39.666Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The stable years","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Sir Isaac Newton is best known for studying falling apples and ‘discovering’ gravity. He’s less well known for putting Britain on the gold standard. But on 22 December 1717, in his role as Master of the Mint, he placed an upper limit of the value of gold relative to silver.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In practice, this meant the pound had slipped onto the gold standard at 3 pounds, 17 shillings and 10.5 pence per ounce. Gold would remain at this price – bar a break during the Napoleonic wars – until the start of World War I.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2KSP4eIgBrQ1j8FvFagvU1","type":"Entry","createdAt":"2026-02-04T16:30:39.862Z","updatedAt":"2026-02-04T16:30:39.862Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockStandOutFigure"}},"locale":"en-US"},"fields":{"text":"1918 – 1945","position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7uxvkNEI42KKU8jMl8bHmy","type":"Entry","createdAt":"2026-02-04T16:30:39.884Z","updatedAt":"2026-02-04T16:30:39.884Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Churchill and “Hell”","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"World War I shattered this stability. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Almost all countries except the US effectively came off the gold standard at the start of the war. In the years afterwards, many countries wanted to return to it but did so in an uncoordinated fashion.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In 1925, New York took the title of the world’s largest city from London. Around this time, the US dollar overtook sterling as the leading reserve currency. The UK’s role as a financial centre was under threat as the government discussed a return to the gold standard. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Reginald McKenna – former Chancellor of the Exchequer – advised Winston Churchill, the then Chancellor, that “There is no escape, you have to go back, but it will be hell”.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Churchill announced the return to the gold standard at the pre-war level in his April 1925 budget. One pound was worth $4.86. Sterling was widely believed to be overvalued at this level and a period of austerity followed to bring about the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/deflation"},"content":[{"nodeType":"text","value":"deflation","marks":[],"data":{}}]},{"nodeType":"text","value":" necessary to protect Britain’s gold reserves. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"By September 1931, amid the Great Depression, the pain proved too severe. Britain abandoned the gold fix, with sterling plunging by around 30%.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6mb7CthnMHUD11VOFOcOEQ","type":"Entry","createdAt":"2026-02-04T16:30:39.962Z","updatedAt":"2026-02-04T16:30:39.962Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockStandOutFigure"}},"locale":"en-US"},"fields":{"text":"1945 – 1978","position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4GzVPtNpI7q75xkl8TYPYS","type":"Entry","createdAt":"2026-02-04T16:30:39.982Z","updatedAt":"2026-02-04T16:30:39.982Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Call the IMF!","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"After World War II, the Bretton Woods system brought greater stability to the world’s economies. Exchange rates were fixed to the US dollar, which was tied to gold, with some flexibility. This allowed world trade to recover. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, Britain experienced persistent current account deficits and falling reserves, leading to a series of currency crises.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"By 1976, following President Nixon’s closing of the gold window in 1971, the world’s currencies were no longer linked to gold. Jim Callahan’s Labour government was facing another currency crisis due to twin current deficits – Britain was spending more overseas than it was earning, and the government was spending more than it was getting in tax revenues. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"With unemployment already high, the cabinet were divided on plans to cut spending, which would risk yet further job losses. Market confidence suffered and the pound fell sharply. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Famously, the Chancellor of the Exchequer, Denis Healey, turned back from Heathrow to deal with the crisis, calling on the IMF for financial assistance. The cabinet agreed to the spending cuts demanded by the IMF programme, bringing the crisis to an end.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5ZffWkwDq5ZIqC26NXtglV","type":"Entry","createdAt":"2026-02-04T16:30:40.003Z","updatedAt":"2026-02-04T16:30:40.003Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockStandOutFigure"}},"locale":"en-US"},"fields":{"text":"1979 - 1991","position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2xiokhrFpFQJSElOjZ9yK8","type":"Entry","createdAt":"2026-02-04T16:30:40.021Z","updatedAt":"2026-02-04T16:30:40.021Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The Plaza Accord","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In 1979, with US ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":" rampant, Paul Volker was appointed Chair of the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/federal-reserve"},"content":[{"nodeType":"text","value":"Federal Reserve","marks":[],"data":{}}]},{"nodeType":"text","value":" (Fed). Under his leadership, the Fed ramped up ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/base-interest-rate"},"content":[{"nodeType":"text","value":"interest rates","marks":[],"data":{}}]},{"nodeType":"text","value":", breaking a decade-long inflation cycle – and causing ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/recession"},"content":[{"nodeType":"text","value":"recessions","marks":[],"data":{}}]},{"nodeType":"text","value":" in 1980 and 1982. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"President Reagan pursued a growth agenda. As confidence in the US grew, investors piled in, enticed by low stock prices and still-high interest rates. This caused the dollar to soar against global currencies, including the pound.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"By 1985, there was a consensus among global governments that the strong dollar was harming all parties. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"On 22 September, finance ministers and central bankers from the US, UK, West Germany, France and Japan met at the Plaza Hotel in New York. They agreed to intervene and reverse this strength. This policy – the Plaza Accord – was highly successful in weakening the dollar. 1985 marked a low for the pound against the dollar.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4W5E88Wvdxs7dlhbyPbRPG","type":"Entry","createdAt":"2026-02-04T16:30:40.040Z","updatedAt":"2026-02-04T16:30:40.040Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockStandOutFigure"}},"locale":"en-US"},"fields":{"text":"1992 – 1999","position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2Xig3r647tdSuxCRcH9h1L","type":"Entry","createdAt":"2026-02-04T16:30:40.071Z","updatedAt":"2026-02-04T16:30:40.071Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Black Wednesday","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A third of a century ago, on 16 September 1992, Black Wednesday, the pound plunged in value leading to its exit from Europe’s Exchange Rate Mechanism (ERM). ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In 1990, Britain had joined the ERM a decade after it’s eight founding members. The then Fed chair Alan Greenspan helped persuade a reluctant Margaret Thatcher that this could be the “spine” of her economy, along the lines of the gold standard. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This turned out to be accurate, as in 1925, Britain joined at too high an exchange rate. Inflation was above that in Germany, the country that effectively set rates for the whole system.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Economic imbalances rose and, in 1992, markets – and George Soros in particular – sniffed an opportunity. When the pound came under pressure, the Chancellor of the Exchequer Norman Lamont raised rates to 12%, then to 15%, before abandoning the ERM – all in just one day. ","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1RYYdI3E9qTcJORR24io6S","type":"Entry","createdAt":"2026-02-04T16:30:40.093Z","updatedAt":"2026-02-04T16:30:40.093Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"21st century","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Two things change before the turn of the century. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"On 8 October 1992, three weeks after Black Wednesday, Britain introduced an inflation target – a new spine for UK policy. And, on 6 May 1997, four days after the Labour party ended 18 years of Conservative party rule, Chancellor Gordon Brown announced the independence of the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bank-of-england"},"content":[{"nodeType":"text","value":"Bank of England","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"One thing didn’t change – the UK’s fraught relations with Europe. On 23 June 2016, Britain voted to leave the European Union. Sterling dropped 10% overnight, the largest single-day fall in over 30 years.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Higher inflation is the single biggest driver of lower currencies over the long run. Inflation has spiked four times in the UK over the last 25 years, with each peak higher than in the Euro-zone.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, much of the difference has been due to one-off factors – the fall in the pound in 2008 and 2017, higher VAT in 2011, and the energy price mechanism in 2022. These aren’t structural issues that mean that higher inflation should persist. And average UK inflation has been in line with the US since the turn of the century.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Outlook for sterling","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"100 years ago, the pound was reluctantly handing the baton to the US dollar in the race to be the world’s reserve currency. As the UK shrank as a share of the global economy, this created natural sellers among foreign central bank reserve managers. Today, central banks are diversifying away from the US dollar – although the gold price is the most obvious beneficiary, not other currencies.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Since the pound’s low point in 1985, central banks across the developed world have adopted inflation targeting. This has led to a convergence in both inflation rates and interest rates – two key drivers of currency movements. The period of UK exceptionalism – an exceptionally weak currency – was over.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"When the UK joined both the gold standard and the European ERM at too high an exchange rate, this added to existing imbalances that ultimately led to a currency correction. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Today’s inflation targeting regime is different. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Yes, tightening is still necessary when inflation and inflation expectations are too high. But, in contrast to these prior regimes, there is no necessity to bring ","marks":[],"data":{}},{"nodeType":"text","value":"absolute","marks":[{"type":"italic"}],"data":{}},{"nodeType":"text","value":" price levels back down after a burst of inflation, like the 2021-23 episode. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Today, the UK twin current account and budget deficits have led to fears of a 1976-style crisis. But there are major concerns about government borrowing across the developed world – and currencies are a relative thing.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The political cost of a crisis is clear. Labour lost the next election after the 1976 episode, in 1979. The same was eventually true for the Conservatives after 1992, at the next election in 1997. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In our view, an IMF programme today would undoubtedly recommend a hike in at least one of the big three taxes, breaking a Labour manifesto promise. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We see sterling as a barometer on Rachel Reeves’s ability to balance the need for fiscal prudence, economic growth and honouring political pledges.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Valuations matter over the long term, much less so over the year. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Today, the US dollar is overvalued against sterling, the euro and the yen. But this is a minor ingredient in the recent weakness of the dollar, which has largely been driven by the significant shifts in US policies.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If this summary leaves you unclear on our forecast for the pound, you’ve read it right. Currency markets are inherently hard to predict. From 1925 to 1985, the pound was a one-way bet. Today, we don’t see a major valuation imbalance, interest rate disparity, or difference in economic outlook relative to other countries that makes sterling stand out – one way or the other. 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Here we explore the four factors that drive forecasts and why it’s important to be humble.","publishedDate":"2025-09-24","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":true,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6HlDyWHl95g9AdTB37D8F6","type":"Entry","createdAt":"2025-09-24T14:50:24.799Z","updatedAt":"2025-09-24T14:50:24.799Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":7,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We build our investment strategies for long-term investors in four steps. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"First, we set target levels for risk, from cautious to adventurous investors. Second, we define the asset classes we use. At a broad level, these are ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/shares"},"content":[{"nodeType":"text","value":"shares","marks":[],"data":{}}]},{"nodeType":"text","value":", ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bonds"},"content":[{"nodeType":"text","value":"bonds","marks":[],"data":{}}]},{"nodeType":"text","value":", cash and alternatives. Then we forecast risk and return for each asset class, including how they interact with each other. And lastly, we combine asset classes to build portfolios that offer the highest expected return for each level of risk.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Here, we focus on how we forecast returns. There are four ingredients:","marks":[],"data":{}}]},{"nodeType":"unordered-list","data":{},"content":[{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The returns implicit in market prices","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Investment theory","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Consensus views","marks":[],"data":{}}]}]},{"nodeType":"list-item","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Historical returns","marks":[],"data":{}}]}]}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. Remember, investments and any income from them can rise and fall in value, so you could get back less than you invest. Past performance isn’t a guide to the future. If you’re not sure if an investment’s right for you, ask for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/financial-advice/investment-advice"},"content":[{"nodeType":"text","value":"financial advice","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Market-implied returns","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"There are over 70 UK ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/shares/corporate-bonds-gilts"},"content":[{"nodeType":"text","value":"government bonds","marks":[],"data":{}}]},{"nodeType":"text","value":" in issue today. At the time of writing, the shortest duration bond is due to be repaid in 11 days while the longest expires in 2073. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Comparing, for example, the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/yields"},"content":[{"nodeType":"text","value":"yield","marks":[],"data":{}}]},{"nodeType":"text","value":" on a one-year bond with a two-year one allows us to calculate what the market expects the yield on a one-year bond to be in a year’s time. Comparing all 70 gives us a comprehensive picture of market expectations.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We can carry out a similar exercise for government bonds in other countries, which also allows us to extract implied forecasts for currencies. Adding analysis of ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":"-linked bonds, corporate bonds, options and ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/derivatives"},"content":[{"nodeType":"text","value":"derivatives","marks":[],"data":{}}]},{"nodeType":"text","value":" markets gives us forecasts for a long list of markets – cash, government fixed-income bonds, government inflation-linked bonds, corporate bonds, exchange rates, volatility and inflation.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Investment theory","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"There’s no equivalent easy way of extracting expected returns for shares from market pricing. Instead, we turn to investment theory. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This gives us two possible approaches.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The first takes a top-down view, looking at global equities as a whole. We should expect a higher return on shares than bonds, to compensate us for the additional risks. We assume a premium of 5% per annum, informed by a range of academic studies. We adjust forecasts for individual markets based on their relative riskiness. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Therefore, for example, we expect a higher return for more volatile smaller companies and a lower return for more stable infrastructure shares.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The second approach builds forecasts from the bottom up. For example, the high valuation of the US equity market translates into a lower expected return, all else being equal. Investors must then decide if the higher valuation will be justified, either because of its more dynamic economy or because it’s home to the companies expected to benefit most from the boom in artificial intelligence. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Consensus views","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Government bonds come in two varieties – fixed interest and inflation linked. By comparing the two, we can calculate the inflation rate expected by the market. However, inflation-linked bonds are a particularly good insurance policy for pension providers and insurance companies that want to hedge their long-term liabilities. Like all insurance policies, there’s a price to pay – and this means the implied inflation rate isn’t a pure measure of investor expectations.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Surveys of professional economists provide an alternative measure of long-term inflation expectations, avoiding this distortion. The Federal Reserve Bank of Philadelphia offers a publicly available measure of US inflation expectations. For other countries, forecasts are available from commercial data providers. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Historical returns","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Past performance is not a guide to the future. However, a study of long run returns can still provide useful context for long-term investors. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The UBS Global Investment Returns Yearbook documents the returns on stocks, bonds, cash and currencies since 1900 for 23 countries, alongside shorter histories for over 60 more. This study allows us to understand how our current forecasts compare to realised 10-year returns in many different economic and political environments.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For some asset classes, like ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/commodity"},"content":[{"nodeType":"text","value":"commodity","marks":[],"data":{}}]},{"nodeType":"text","value":" futures, we find no robust theoretical approach to predicting returns, nor a market implied forecast, nor a consensus view. Here, historical returns provide us at least some sense of scale for likely risk and return going forward.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We also lean on history when forecasting how markets interact with each other. We consider the longest history possible but put more emphasis on more recent data.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Be humble","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If you invest in shares and bonds, you are implicitly making a forecast – that these asset classes are expected to outperform cash over the long term. We agree! But we know that some decades are better than others. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Sometimes ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/diversification"},"content":[{"nodeType":"text","value":"diversification","marks":[],"data":{}}]},{"nodeType":"text","value":" is effective, other times less so. We consider a wide range of outcomes when building our portfolios. We stress test them against historical downturns and forward-looking scenarios to better understand risks.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A forecast of the expected return of your portfolio can help you plan for a better financial future. But do make sure that your plans cover the risks embedded in those forecasts.","marks":[],"data":{}}]}]}}}],"authors":["$10:props:data:authorArticles:0:fields:authors:0"],"newsLetterSignUp":"$10:props:data:authorArticles:0:fields:newsLetterSignUp","dropCap":"Standard","metadata":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4rtMtpNNtk4OiYankXCYTP","type":"Entry","createdAt":"2025-09-24T14:50:24.820Z","updatedAt":"2025-09-24T14:50:24.820Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"pageMetadata"}},"locale":"en-US"},"fields":{"seoTitleTag":"How to forecast stock markets| HL","seoMetaDescription":"Our investment strategies are built on our predictions for markets. 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[@ what-does-a-falling-us-dollar-mean-for-stock-markets-and-investors]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"We look at what could be next for the US dollar, how it affects stock markets, and which investments could benefit.","publishedDate":"2025-08-11","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":true,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7IFGDbUQye1vNyokyG1V75","type":"Entry","createdAt":"2025-08-11T15:44:04.579Z","updatedAt":"2025-08-11T15:44:04.579Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US dollar is the most traded currency in the world and often considered one of the few safe-haven currencies.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, 2025 has been a horrid year for the most popular currency in the world – it’s fallen more than 10% in the first seven months of the year ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But does this mark the end of an uptrend that started in 2011? We look at the factors driving the currency – and what it could mean for your investments.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. Remember, investments and any income from them can rise and fall in value, so you could get back less than you invest. Past performance isn’t a guide to the future. If you’re not sure if an investment’s right for you, ask for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/financial-advice/investment-advice"},"content":[{"nodeType":"text","value":"financial advice","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Trump and the dollar","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The policies and statements of President Trump and his administration are the most obvious culprit for the dollar’s decline this year. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"When Trump announced a bizarre set of tariffs on ‘Liberation Day’, this led to a simultaneous fall in the US dollar and rise in US Treasury yields – something we associate with emerging markets in crisis.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A series of unprecedented statements have led investors and foreign central banks to question their holdings of dollars. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Trump has pressured the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/federal-reserve"},"content":[{"nodeType":"text","value":"US Federal Reserve","marks":[],"data":{}}]},{"nodeType":"text","value":" (Fed) to cut interest rates, threatening the independence of the central bank. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"His Big Beautiful Bill has increased expected government borrowing. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Chairman of the Council of Economic advisers has written about taxing foreign central bank holdings of US Treasuries. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"And his finance minister has suggested converting 10-year Treasury bonds into 100-year bonds. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The long cycle","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In 1971, President Nixon decoupled the US dollar from the gold standard to prevent a run on US gold reserves. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This ended the Bretton Woods regime, the monetary system that the US and other nations put in place in 1944 as a framework for the post-war global economy. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Since then, the US dollar has gone through three long cycles.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6NK7LhXMeldyymFtmwbSre","type":"Entry","createdAt":"2025-08-11T15:44:04.597Z","updatedAt":"2025-08-11T15:44:04.597Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":10,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHighchart"}},"locale":"en-US"},"fields":{"title":"The US dollar since 1971","chartId":"chart2","chartCode":"$26","disclaimer":"Past performance isn’t a guide to future returns.","source":"Source: Bloomberg, The US trade-weighted real dollar index, May 2025","position":"Center"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4ro4u5KzQ2NRSh1k2Ihr4T","type":"Entry","createdAt":"2025-08-11T15:44:04.615Z","updatedAt":"2025-08-11T15:44:04.615Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":9,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What drives these US dollar cycles? ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We think these four factors will help us assess whether we’ve reached a turning point – valuation, interest rates, investor flows and geopolitics.","marks":[],"data":{}}]},{"nodeType":"heading-3","data":{},"content":[{"nodeType":"text","value":"Valuation","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"At the end of last year, the value of the dollar was higher than at its peaks in 1985 and 2001. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The chart above shows the performance of the dollar against other leading currencies, adjusted for their relative inflation rates. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The greenback has swung between overvalued and undervalued over this 50-year period. ","marks":[],"data":{}}]},{"nodeType":"heading-3","data":{},"content":[{"nodeType":"text","value":"Interest rates","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In August 1979, when Paul Volcker became chair of the US Federal Reserve, interest rates were 11%. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"By June 1981, the Fed had pushed rates up to their all-time high of 19%. This brought about the end of a decade of high ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":". It also spurred a big rise in the dollar.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The interest rate story today is more nuanced. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Most major central banks in the developed world are now independent, reducing government interference. And they have adopted inflation targeting. This has anchored long-term inflation expectations, even during the recent bout of price rises. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We expect US inflation to rise in the near-term due to tariff hikes, before falling back towards target next year. This means US interest rates are likely to remain above those in Europe and Japan. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In theory, higher interest rates compared to other countries makes investing in dollars more appealing, increasing demand for dollars and putting upward pressure on its value. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But, with rates already low in the euro area and Japan, the US has more room to cut over the coming year.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Which matters more – higher rates or a narrowing of the difference? ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In practice, exchange rates follow changes in the markets’ expectations of interest rates. These expectations shift as economic news comes out. When we look back from the future, it’s likely that it was something unexpected that mattered most.","marks":[],"data":{}}]},{"nodeType":"heading-3","data":{},"content":[{"nodeType":"text","value":"Investor flows ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In August 1995, Netscape listed at $28 dollars per share and rose to $74 on its first day of trading. This kicked off a wave of enthusiasm for technology, media and telecoms stocks. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Around the same time, investors’ interest in emerging markets reversed due to a series of crises from 1997 to 1999. Investments flowed into the US stock market and boosted the dollar over the next five years.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The dotcom bubble burst in 2000. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A year later, China entered the World Trade Organization, heralding a two-decade boom in economic growth. Investor flows U-turned, sending the dollar into reverse.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The current bull market in the dollar started in 2011, when the euro area was in the midst of a crisis. Since then, investor appetite for US technology stocks has soared – more recently due to the potential of artificial intelligence.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Today, valuations for US stocks have risen towards the levels of the peak in the dotcom bubble on some measures. But the major companies behind the boom today are enjoying strong earnings growth – a missing ingredient in the dotcom era. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The bull case for the dollar is a continuation of US exceptionalism.","marks":[],"data":{}}]},{"nodeType":"heading-3","data":{},"content":[{"nodeType":"text","value":"The importance of geopolitics","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In September 1985, finance ministers from the US, France, West Germany, Japan and the United Kingdom met in the Plaza Hotel in New York to sign an agreement to weaken the US dollar, the Plaza Accord. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"They wanted to reverse the trade imbalances building up, in part caused by an overly expensive dollar. The agreement was highly successful, triggering a prolonged decline in the greenback.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Political events in 2025 are a lot less coordinated. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The news on tariffs seems to change daily. In an environment of weak global economic growth, few countries are keen to have an appreciating currency since it makes their exports less competitive. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Mario Draghi’s report has highlighted the challenges faced by the slow growing EU economy. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, there is room for optimism. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A big boost in government spending in Germany is a significant shift in policy and has the potential to raise growth over the next few years. A more dynamic Europe could be the catalyst for a turn in the dollar cycle.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What could all this mean for investors?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We find the valuation case for a weaker dollar compelling. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, when we look at interest rates, investors flows and geopolitical factors, it’s less easy to build a high conviction case that we’ve reached a clear turning point in currency markets. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"And we know that currencies are notoriously hard to predict.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We’re more confident in looking at the investing case IF the dollar falls.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The most obvious conclusion is to favour non-US stocks over US stocks. Emerging markets are particularly sensitive to dollar moves, both shares and bonds. These less-developed economies often borrow in dollars, so a weaker US currency would lower the cost of their debt repayments.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Commodities are typically priced in dollars. A lower dollar therefore makes commodities more affordable – good news for commodity-producing companies and countries.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US dollar also matters for UK stock pickers. It lowers the revenues from dollar earners and lowers the cost of US imports. This matters more for international businesses than domestic players.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"3iXOaqhd5DrZhY6YoAwSFv","type":"Entry","createdAt":"2025-08-11T15:44:04.630Z","updatedAt":"2025-08-11T15:44:04.630Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":8,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"internalTitle":"FTSE 100 reaches another high","image":false,"position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5MJz4H3kiE3DDK5uqjl7by","type":"Entry","createdAt":"2025-08-11T15:44:04.657Z","updatedAt":"2025-08-11T15:44:04.657Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Finally, a weaker dollar means a stronger pound, yen, euro and other currencies – on average. But the pound is sensitive to domestic issues, not just international developments – remember the Truss mini-budget.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Individual currency moves are hard to forecast. Investors can reduce the volatility of their portfolio by diversifying internationally, exposing them to a range of different currencies.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6XLs6k2OQIfq4ehMbZlyUH","type":"Entry","createdAt":"2025-08-11T15:44:04.673Z","updatedAt":"2025-08-11T15:44:04.673Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"internalTitle":"Where are professional stock pickers planning to invest in the rest of 2025?","image":true,"position":"Inline"}}],"authors":["$10:props:data:authorArticles:0:fields:authors:0"],"newsLetterSignUp":"$10:props:data:authorArticles:0:fields:newsLetterSignUp","dropCap":"Standard","metadata":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2vfJUgk85fkUajRo3ZyElE","type":"Entry","createdAt":"2025-08-11T15:44:04.834Z","updatedAt":"2025-08-11T15:44:04.834Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"pageMetadata"}},"locale":"en-US"},"fields":{"seoTitleTag":"What does a falling US dollar mean for stock markets and investors? | HL","seoMetaDescription":"We look at what could be next for the US dollar, how it affects stock markets, and which investments could benefit.","seoIndexingRules":"index,follow","snippetSettings":true,"openGraphType":"website","twitterCardType":"summary_large_image"}},"sedols":["firstSedol"],"showImageOnArticle":true,"featuredImage":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1VpLgg2J31ecmnCXfKvP7V","type":"Asset","createdAt":"2025-08-11T15:44:04.482Z","updatedAt":"2025-08-11T15:44:04.482Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"locale":"en-US"},"fields":{"title":"US dollars $50 and $100 bills.jpg","file":{"url":"//images.hl.uk/vvl3z0p6qtad/1VpLgg2J31ecmnCXfKvP7V/50cea0bdb973e8686675c5181500c299/US_dollars__50_and__100_bills.jpg","details":{"size":964767,"image":{"width":1260,"height":840}},"fileName":"US dollars $50 and $100 bills.jpg","contentType":"image/jpeg"}}}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"IseJ9zoYnIoFKMULMbdkB","type":"Entry","createdAt":"2025-06-26T11:35:19.105Z","updatedAt":"2025-06-26T11:35:19.105Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":21,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"article"}},"locale":"en-US"},"fields":{"theme":"Black","titleAndPath":"What’s next for global interest rates and how can investors benefit? [@ whats-next-for-global-interest-rates-and-how-can-investors-benefit]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"Inflation and interest rate expectations are shifting and that’s presenting opportunities for active investors.","publishedDate":"2025-06-26","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":true,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1vkUU0fxN65kLfi5GxJ53A","type":"Entry","createdAt":"2025-06-26T11:35:19.290Z","updatedAt":"2025-06-26T11:35:19.290Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":6,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"When President Trump hiked trade tariffs, he pushed up expectations for both US ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":" and unemployment. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This makes the US ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/federal-reserve"},"content":[{"nodeType":"text","value":"Federal Reserve’s","marks":[],"data":{}}]},{"nodeType":"text","value":" (Fed) job more difficult – they must balance these two economic measures when setting interest rates. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, the recent volatility in oil prices adds a further layer of complexity.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Last week, the US and UK central banks kept rates on hold, while there were rate cuts in the euro area, Switzerland, Sweden, Norway and India. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"So, what could be next for global interest rates amidst all the economic and market uncertainty.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The US picture ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Should the US Federal Reserve be cutting rates? ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"President Trump thinks that should have already happened, labelling its Chair ‘too late’ Jerome Powell. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Fed Governor Christopher Waller believes the central bank is in a position to cut as early as next month. (It might not be a coincidence that he’s seen as a contender when Trump looks to replace Powell in 2026.) ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But the market is pricing in September for the next cut, with three more predicted over the next year.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"US rate forecasts have swung wildly over the last year. Back in September 2024, six cuts were expected this year. By February, robust economic growth and above-target inflation meant only one cut was priced in.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Fed has a dual mandate – to achieve both stable prices and maximum sustainable employment. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The imposition of tariffs means the Fed must decide which matters most, the likely rise in inflation or the forecast hit to employment. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"With inflation still above target and growth robust for now, most forecasters think the Fed will watch and wait until their September meeting.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The spike in oil prices since the US, Israel and Iran have traded military strikes adds another layer of uncertainty for policy makers. We expect the effects to be short lived, but major disruptions to global oil flows could change the picture.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What about the rest of the world?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Meanwhile, in Switzerland last week, we saw a return to the era of zero interest rates. Inflation fell to -0.1% in May, the first negative reading in four years.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The European Central Bank has cut rates eight times since May 2024. May’s inflation rate came in below the 2% target, at 1.9%. With economic growth expected to remain weak, the market sees room for one more quarter-point cut between now and next spring.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The UK is in a slightly worse position, with similarly weak economic growth but stickier inflation. The market sees rates falling from 4.25% today to 3.5% by this time next year.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The picture is very different in Japan, where inflation rose to 3.5% in May, exceeding expectations. With interest rates down at 0.5%, we see room for them to rise over the year ahead. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"China is experiencing mild ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/deflation"},"content":[{"nodeType":"text","value":"deflation","marks":[],"data":{}}]},{"nodeType":"text","value":". We expect this will keep policy rates low for the foreseeable future. Still, the currency saw modest gains against the dollar over the last two months – something to watch.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The emerging economies in the G20, outside China, fall into three camps. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In the first – in India, Indonesia, Saudi Arabia, South Africa and South Korea – inflation is back below 3%. That’s below the UK rate. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In the second, inflation in Brazil and Mexico is around 4-5%. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"And in the third, inflation remains a major problem in Turkey (35%) and Argentina (44%), although the current rates are well below their 12-month highs (72% and 272% respectively). ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Different cycles, different returns","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The IMF has downgraded its forecast for global growth. We think this should see inflationary pressures ease – once the one-off impact of tariff hikes is behind us. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For now, the differing outlooks for inflation and interest rates provides potential for active investors to take views on rates, ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bonds"},"content":[{"nodeType":"text","value":"bonds","marks":[],"data":{}}]},{"nodeType":"text","value":" and currencies. 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Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/diversification"},"content":[{"nodeType":"text","value":"diversified","marks":[],"data":{}}]},{"nodeType":"text","value":" portfolio.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For more details on the fund and its risks, use the links to its factsheets and key investor information.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"3HaWRaCRdGc8rMMBOpr5r9","type":"Entry","createdAt":"2025-06-26T11:35:19.375Z","updatedAt":"2025-06-26T11:35:19.375Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContentWithCompanyInformation"}},"locale":"en-US"},"fields":{"sedol":"B8N45T8","investmentType":"fund","content":{"data":{},"content":[{"data":{},"content":[{"data":{},"marks":[],"value":"Invesco Tactical Bond","nodeType":"text"}],"nodeType":"heading-2"},{"data":{},"content":[{"data":{},"marks":[],"value":"This is one of our ","nodeType":"text"},{"data":{"uri":"https://www.hl.co.uk/features/5-funds-for-2025"},"content":[{"data":{},"marks":[],"value":"five funds to watch for 2025","nodeType":"text"}],"nodeType":"hyperlink"},{"data":{},"marks":[],"value":" and can invest in lots of different types of bonds from all over the world. ","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"This means it can potentially take advantage of the different outlooks for inflation and interest rates in different regions. ","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"The fund is co-managed by Stuart Edwards and Julien Eberhardt who have been part of the fixed income team at Invesco for well over a decade. ","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"Over the long term the aim is to deliver a total return, through the combination of capital growth and income, rather than focusing purely on generating a high income.","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"The managers can invest in all types of bonds, with few constraints placed on them. This includes high yield bonds and derivatives, both of which can add risk if used. ","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"The performance of the fund hinges on their ability to interpret the bigger economic picture, and they can alter the fund's investments based on what they see. They aim to shelter the fund when they see tough times ahead, and seek strong returns as more opportunities become available. ","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"We think this is a good fund for exposure to the wider bond market. It takes away the hassle of deciding which type of bonds to invest in and when, because the managers are given the discretion to make these decisions for you. 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– what does a weaker US dollar mean for investors [@ is-the-worlds-reserve-currency-under-threat-what-does-a-weaker-us-dollar-mean-for-investors]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"The world’s reserve currency has been dropping in recent months. Is its position under threat? We look at what this means for investors.","publishedDate":"2025-06-13","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":true,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"23SJ8Uxb9LG9vnMMhXOm4A","type":"Entry","createdAt":"2025-06-13T10:28:23.065Z","updatedAt":"2025-06-13T10:28:23.065Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":12,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The simultaneous sharp declines in US ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/shares"},"content":[{"nodeType":"text","value":"shares","marks":[],"data":{}}]},{"nodeType":"text","value":", bonds and the dollar after President Trump’s “Liberation Day” raise an important question. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Is the US dollar’s role as the world’s reserve currency under threat?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We look at why, for now, there’s no real alternatives and the dollar’s likely to remain top dog despite the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=price%20should%20be.-,Volatility,-Volatility%20is%20a"},"content":[{"nodeType":"text","value":"volatility","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. Remember, investments and any income from them can rise and fall in value, so you could get back less than you invest. Past performance isn’t a guide to the future. If you’re not sure if an investment’s right for you, ask for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/financial-advice/investment-advice"},"content":[{"nodeType":"text","value":"financial advice","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The dollar’s decline","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The recent plunge in the value of the US dollar in 2025 puts it on track for its worst performance in 30 years. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The parallel decline in US shares, ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bonds"},"content":[{"nodeType":"text","value":"bonds","marks":[],"data":{}}]},{"nodeType":"text","value":" and currency is something we associate with ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=Learn%20more-,Emerging%20markets,-Shares%20in%20%27emerging"},"content":[{"nodeType":"text","value":"emerging market","marks":[],"data":{}}]},{"nodeType":"text","value":" crises – when investors lose confidence in a country and have a fire sale, selling everything. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"It wasn’t always like this. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In a typical crisis, the credit window - companies’ ability to borrow - goes from wide open to slammed shut in an instant. This leaves borrowers scrambling for funds – and much of that funding around the world’s in dollars. This helps push up the value of the US dollar against other currencies.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The dollar also typically gains when the US economy is booming and demand for borrowing is strong. Other currencies advance against the dollar in a goldilocks economy – not too hot, not too cold. This creates a “dollar smile” rising when the economy is either weak or strong, but falling in between.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Today, that smile has turned to a frown.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Before the dollar","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Changes in the world’s dominant currency are rare. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Spanish “pieces of eight” underpinned the global financial system in the sixteenth century, followed by the Dutch guilder a century later. Pound sterling reigned supreme from the end of the Napoleonic War until the baton passed to the dollar between the world wars.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US economy overtook the UK economy years before the dollar outstripped the pound in financing global trade. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The dollar dominates ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If you drink a Georgian wine in a restaurant in Argentina, a Canadian wine in New Zealand, or a South African wine in Lebanon, there’s a very good chance that it was bought and sold in dollars as it crossed between multiple continents.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"When one currency dominates global transactions, the costs of trading that currency falls. So, while the US share of global GDP has shrunk from around half in the 1950s to around a quarter today, the US dollar is on one side of around 90% of all foreign exchange transactions.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What are the alternatives?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Currently, no other currency offers the same liquidity in high quality government bonds to match the US. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Europe remains an unfinished union, reluctant to issue joint EU bonds in the scale needed. China maintains tight capital controls so the renminbi is a tiny proportion of the reserves of the world’s central banks and is less attractive for investors.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Gold’s a viable store of value, but it’s too bulky to be practical for payments in cross-border trade.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"None of this means that the dollar’s role cannot shrink. The dollar’s share of global foreign exchange reserves has fallen from around 70% to under 60% over the last 25 years. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This decline has been offset by a growing use of currencies from small, well-managed economies like Switzerland, Australia, Canada, New Zealand, Singapore, South Korea, Denmark or Norway. Central bank reserve managers are ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/diversification"},"content":[{"nodeType":"text","value":"diversifying","marks":[],"data":{}}]},{"nodeType":"text","value":" geographically - in the same way that investors should too.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Emerging markets are building direct ties that cut out the currencies of the developed world. Brazil plans to issue “Panda Bonds” – debt issued in Chinese renminbi – later this year.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Stability under threat?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The role of the US dollar seems secure, but the new administration is pursuing policies that could undermine its stability. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Trump’s chief economist, Stephen Miran, has proposed a Mar-a-Lago accord that threatens to forcibly convert foreign holdings of US government bonds into hundred-year bonds paying low interest rates. This will probably have a dramatic negative effect on markets so should be unlikely to happen. But, after the events of the last few months, it’s no simple task predicting the direction of US policy.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We expect the US dollar to maintain its dominant role among global currencies. But we are likely to see a gradual shift towards a more multi-polar world over the next decade. And investors cannot ignore the risk that policy shocks accelerate this trend.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1hY1LuTWjIWxjbetBzL0Hy","type":"Entry","createdAt":"2024-11-08T15:53:41.455Z","updatedAt":"2024-11-08T15:53:41.455Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":7,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockInfoBox"}},"locale":"en-US"},"fields":{"title":"Invest in the US with HL","infoSummary":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US makes up over half of the global stock market. 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[@ are-we-heading-for-recession-in-2025-and-what-could-it-mean-for-investors]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"With some economists putting the odds of a US recession at around 50:50, we look at what it could mean for stock markets, how long a recession could last and what investors can do.","publishedDate":"2025-05-06","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":true,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"24HHIPBmI5vAN5FV1GBm3t","type":"Entry","createdAt":"2025-05-06T16:36:29.088Z","updatedAt":"2025-05-06T16:36:29.088Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":7,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In 2022 and 2023 the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/federal-reserve"},"content":[{"nodeType":"text","value":"US Federal Reserve","marks":[],"data":{}}]},{"nodeType":"text","value":" hiked interest rates from 0.25% to 5.5%, to tackle the soaring ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":" caused by the COVID-19 pandemic. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Investors feared a ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/recession"},"content":[{"nodeType":"text","value":"recession","marks":[],"data":{}}]},{"nodeType":"text","value":". ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But growth proved robust and inflation headed back down towards target levels – a positive backdrop for stock investors. This allowed the central bank to cut rates. And when Trump won the election, business leaders’ confidence rose in anticipation of pro-business policies.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"GDP fell 0.3% in the first quarter of 2025. But, this was largely due to the negative contribution from trade, with buyers of foreign goods front-running the tariff increases. Final sales to private domestic purchasers is arguably a better measure of underlying growth and this grew 3%. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Then came Trump’s tariff storm","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This all changed on 2 April with the announcement of President Trump’s ‘Liberation Day’ tariffs. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The many twists and turns in tariff policy since has had a negative impact on the economic outlook, with surveys of consumer and business confidence plunging. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Economists have also revised down their forecasts for US and global economic growth. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A Bloomberg survey of economists puts 40% odds on a US recession in the next 12 months. Markets say 70%.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. Investments can rise and fall in value so you could get back less than you invest. If you’re not sure if an investment is right for you, ask for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/financial-advice"},"content":[{"nodeType":"text","value":"financial advice","marks":[],"data":{}}]},{"nodeType":"text","value":". Remember, past performance isn’t a guide to the future.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"So, will we get a recession or not?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If the odds of a recession are close to the toss of a coin, what will decide which way we fall? ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We see two possible scenarios on tariffs.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If tariffs are implemented as currently set out – or increased further – then the odds of a US recession increase.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, if the US reaches bilateral deals to lower tariffs with a range of countries, then the odds reduce. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The adverse reaction of markets could also lead to a policy U-turn. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US stock market, government bond prices and the dollar all fell immediately after tariffs were announced. And we’ve seen signs of pragmatism, like introducing a 90-day pause and softening of tariffs on cars after lobbying by the industry.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Hard and soft data – what should investors be looking out for?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"What data are we watching to judge whether the economy is set to shrink? ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The data that really matters is the hard data like GDP growth and unemployment data. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, this is issued with a time lag measured in weeks or months. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"And because the definition of a recession is two consecutive quarters of contraction, it means they’re typically not confirmed for around seven months after they start.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We also monitor soft data, like confidence surveys and business investment intensions, to give us a feel for where things are heading. These aren’t entirely reliable, but they provide investors with a more up-to-date indicator of activity.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Investors can also look at daily and weekly data to judge what’s going on, such as daily debit card spending, restaurant bookings, and weekly retail sales.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The impact of cyclical, structural and shock recessions","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The impact of a recession on investments depends on the cause of the downturn. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In ","marks":[],"data":{}},{"nodeType":"text","value":"Any Happy Returns","marks":[{"type":"italic"}],"data":{}},{"nodeType":"text","value":", Goldman Sachs’ strategist Peter Oppenheimer studies three different types of bear markets.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"It’s natural for economies to go through cycles – booms and busts. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In a typical four-stage cycle, an economy will go from a recession to recovery, to expansion, to overheating before falling into recession again. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In the UK, these cycles have lasted around eight years on average over the last 200 years.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Occasionally, structural imbalances build up in economies leading to a deeper, longer decline. The Great Depression of the 1930s, the inflation shock of the 1970s and the Global Financial Crisis of 2007-2009 are the prime examples.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Recessions can also be triggered by shocks – such as when the global economy ground to a halt due to pandemic-led lockdowns.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For stock investors, recessions due to structural imbalances are particularly painful, with declines lasting three and a half years on average. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Cyclical bear markets typically last over two years. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"By contrast, downturns from event-driven shocks typically last around eight months and recover within just over a year.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What do recessions mean for stock markets?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"When economic growth slows down, so too does growth in companies’ sales and earnings – bad news for most stock investors.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Lower corporate earnings are also bad news for holders of corporate bonds as they increase the risk of default.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Recessions typically lead to higher unemployment, putting downward pressure on wages – and therefore inflation. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This is good news for holders of government bonds. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Today, however, the outlook for inflation is clouded by the tariff story since these are expected to boost prices in the US.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In general, investments perceived as ‘safer’ tend to outperform more risky investments. Companies with more predictable earnings, like healthcare stocks, have tended to hold up better than businesses more exposed to the economic downturn, like consumer discretionary stocks.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5hOUpZv9i2ro50FYkbxpvC","type":"Entry","createdAt":"2025-05-06T16:36:29.109Z","updatedAt":"2025-05-06T16:36:29.109Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"image":true,"position":"Pull out right"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6DBQG9y781yCvMa5XPPdgU","type":"Entry","createdAt":"2025-05-06T16:36:29.134Z","updatedAt":"2025-05-06T16:36:29.134Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":9,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"How to invest during a recession","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The key lesson to remember is every recession is followed by a recovery. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Timing the top and bottom is impossible – we only know with hindsight when a recession starts and ends. And, with investors already putting high odds on an upcoming recession, some of the bad news has already been factored into prices.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"It’s usually best to stick with your investment strategy during a recession and to think with the long term in mind. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, it can also make it a good time to check in on your investments and make sure you’re happy with your portfolio and how much risk you’re taking. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If you want to reduce the vulnerability of your portfolio to downturns, think about diversifying in different asset classes, sectors and countries.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"You could also consider investing regularly through a direct debit – this way you can benefit from pound-cost averaging.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Pound-cost averaging is a powerful way to help smooth out the ups and downs of the market.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"When you invest monthly, you buy more units or shares in an investment at lower prices if the value falls, helping you achieve better returns. However, if investment prices continue to rise, you’ll buy fewer units or shares at higher prices.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"By investing at many different times, you avoid the risk of investing all your money when the market is at its highest. 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[@ trumps-tariffs-fuel-inflation-concerns-what-does-this-mean-for-investors]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"Tariffs globally have shaken markets and caused inflation expectations to spike. But what does it mean for investors?","publishedDate":"2025-04-17","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":true,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1Bhmvld6AUxzsihDr33LhU","type":"Entry","createdAt":"2025-04-17T14:39:55.725Z","updatedAt":"2025-04-17T14:39:55.725Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Ahead of the Easter weekend, you might have bought an Easter egg for a family member, friend or even yourself. But since last year, prices for these chocolatey treats have soared as much as 50%.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Even though ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":", the rate of price rises, has fallen from its COVID-19 pandemic highs, it’s still stubbornly above central bank targets in most nations. With the tariff trade war coming out of the US, we can expect inflation to likely spike again. Raising prices further for more household goods including our Easter eggs.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But what else does inflation mean for investors and are there opportunities?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. If you’re not sure if an action is right for you, ask for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/financial-advice"},"content":[{"nodeType":"text","value":"financial advice","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"How will president Trump’s tariffs impact UK consumers? ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Tariffs being slapped onto global trading partners has led economists to raise forecasts for US inflation and cut expectations for growth. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This scenario echoes the stagflationary environment of the 1970s. The decade had two spikes in inflation, causing poor returns for investors in both ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/shares"},"content":[{"nodeType":"text","value":"shares","marks":[],"data":{}}]},{"nodeType":"text","value":" and ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bonds"},"content":[{"nodeType":"text","value":"bonds","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For now, there’s a brief pause from the higher tariffs for most countries, apart from China, but a flat 10% tariff remains on most goods being imported into America. ","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"TlJyIIlIbWYWgZ8kJFcNv","type":"Entry","createdAt":"2025-04-17T14:39:55.747Z","updatedAt":"2025-04-17T14:39:55.747Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"image":true,"position":"Pull out right"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"33u9XyzJ4ifnfFHxG5PxuZ","type":"Entry","createdAt":"2025-04-17T14:39:55.785Z","updatedAt":"2025-04-17T14:39:55.785Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"It’s not immediately obvious if the 145% tariffs on Chinese goods arriving in the United States will affect prices in the UK. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Yet, on Monday Sony announced a 10% hike in the UK cost of the made-in-China PlayStation 5. The Japanese company cited “a challenging economic environment, including high inflation and fluctuating exchange rates”. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This raises the question of whether consumers outside America will pay more to partially offset the likely hit to US sales once high tariffs feed through into consumer prices.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"A lesson from history?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We could see another bout of inflation trigger a repeat of the 1970s, when soaring inflation hurt both investors in both shares and bonds.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"32F0BtFjekgIfvatFoiUqY","type":"Entry","createdAt":"2025-04-17T14:39:55.804Z","updatedAt":"2025-04-17T14:39:55.804Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":9,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHighchart"}},"locale":"en-US"},"fields":{"chartId":"chart1","chartCode":"$27","disclaimer":"Past performance isn’t a guide to future returns.","source":"Source: US Bureau of Labour Statistics, as of 31/12/24.","position":"Full"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"d33JdwPxT0I2VxnA7qyQv","type":"Entry","createdAt":"2025-04-17T14:39:55.824Z","updatedAt":"2025-04-17T14:39:55.824Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":6,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The twin peak in global inflation in the 1970s is most closely associated with two oil price spikes. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The price rose in 1973, when OAPEC imposed an oil embargo on nations supporting Israel during the Yom Kippur War. And they soared again during the 1979 Iranian Revolution. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Fast forward to the present and prices are down around 10% this month – expectations of slower global economic growth mean less demand for oil.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But other factors behind this earlier episode have closer parallels with today. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"US inflation was already high before the decade began – above 6% in 1969. The US started to run a trade deficit, as they do now. And when President Nixon ended the convertibility of dollars into gold in 1971, he ripped up the rulebook for economic relations between countries in place since World War II – the Bretton Woods era.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The economic outlook","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"There’s also longer-term structural forces that could push inflation higher in the decades ahead. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"China and other Eastern European economies entered the global trading system in the early 2000s and helped keep prices down through a boost to the global labour supply. But this one-off boost cannot be repeated. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Across developed countries, aging populations will reduce the number of workers, potentially putting upward pressure on wages as well as tax takes.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But it’s not all doom and gloom.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Bad news on economic growth is normally good news for inflation.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The slowdown in demand leads to excess supply, pushing prices lower. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The high tariffs on Chinese goods will force producers to look for alternative markets. A rerouting of supply away from the US is a deflationary force for other countries.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Plus, the US dollar has weakened among all the chaotic developments in US policy. With many of the world’s commodities priced in dollars, this too is a disinflationary force outside America.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Central banks are keenly aware of the errors made in the 1970s. Many introduced inflation targets and their primary role is setting policies to meet them – with consumers expecting them to succeed. So, while inflation is expected to rise in the near-term, US consumers’ expectations of inflation in three years’ time remain unchanged. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What does this mean for investors?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Put simply, high levels of inflation are bad for investors. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This rang true in the 1970s and again in 2022. For bond investors, rising prices lowers the purchasing power of these fixed income securities. For investors in shares, high inflation has historically led to lower valuations.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Real assets like gold, ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/commodity"},"content":[{"nodeType":"text","value":"commodities","marks":[],"data":{}}]},{"nodeType":"text","value":", real estate and infrastructure can provide above-inflation returns in some inflationary scenarios. But these can be unreliable ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=H-,Hedge,-Hedging%20is%20a"},"content":[{"nodeType":"text","value":"hedges","marks":[],"data":{}}]},{"nodeType":"text","value":". ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The real estate market has been reshaped by the COVID-19 pandemic and the shift to working from home. Commodities have fallen as inflation expectations rise. And we see the recent rise in the gold price as driven by a flight to perceived safety as stock market volatility increased coupled with emerging market central banks diversifying away from the US dollar for geopolitical reasons.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"So, while we do think gold and other alternatives can provide welcome diversification in a portfolio in times of market stress, they are not necessarily effective inflation hedges.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In the short term, we expect shares and bonds to remain ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=price%20should%20be.-,Volatility,-Volatility%20is%20a"},"content":[{"nodeType":"text","value":"volatile","marks":[],"data":{}}]},{"nodeType":"text","value":" due to the unprecedented uncertainty over policy. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For long-term investors, we expect both asset classes to offer a return above inflation, but there are no guarantees. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"One way to invest during volatility is through regular investing by direct debit.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Regular investing helps smooth the ups and downs of the market over time through something called pound-cost averaging.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"By investing at many different times, you avoid the risk of investing all your money when the market is at its highest and investment prices are more expensive. But remember, investments can fall as well as rise in value so you could get back less than you put in.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5LXJkaIMLhtfex93ugUnvh","type":"Entry","createdAt":"2025-04-17T14:39:55.846Z","updatedAt":"2025-04-17T14:39:55.846Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockInfoBox"}},"locale":"en-US"},"fields":{"title":"Ready to get started?","infoSummary":{"data":{},"content":[{"data":{},"content":[{"data":{},"marks":[],"value":"With HL you can invest from as little as £25 a month with Direct Debit. ","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"Choose from funds, shares, ETFs, ready-made options and more. 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We take a closer look and explore what could be next for global interest rates in 2025.","publishedDate":"2025-02-05","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:authors:0:fields:categories:0"],"featureArticle":false,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6DgiEqI31kd0ER1zfng78Z","type":"Entry","createdAt":"2025-02-05T09:59:10.878Z","updatedAt":"2025-02-05T09:59:10.878Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/yields"},"content":[{"nodeType":"text","value":"yields","marks":[],"data":{}}]},{"nodeType":"text","value":" on government bonds across the developed world have risen over the last four months as bond prices have fallen, increasing the cost of borrowing for governments.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Typically, interest rate cuts by central banks have led to lower long-term yields on government bonds. However, bond yields have generally risen since the last interest rate cut by the US ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/federal-reserve"},"content":[{"nodeType":"text","value":"Federal Reserve (Fed)","marks":[],"data":{}}]},{"nodeType":"text","value":" in September. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We think investors are pushing up bond yields to reflect the high levels of government borrowing – and the lack of actions to reduce them. But other factors matter too.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Fed typically sets the trend for global rates. In September, the market had priced in six further interest rate cuts for 2025. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Today, only one cut is priced in. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"So, what could be next for interest rates in 2025?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Higher government borrowing costs will challenge government finances over the long term, and that means interest rates are expected to come down eventually.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Here are the seven things the Fed will be looking at when deciding what to do next. 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It considers an inflation rate of 2% to be the optimal target for price stability. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"Inflation","marks":[],"data":{}}]},{"nodeType":"text","value":" has fallen from 7.2% in June 2022 to 2.1% in September 2024, ticking up to 2.6% in December. The real rate today is over 2% – that’s the interest rate minus the rate of inflation. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"It’s about 1% above the 50-year average, suggesting there’s room for a rate cut. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, the core measure of inflation, which excludes the more volatile food and energy prices, is further from target levels at 2.8%.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5Gzt57KquKiVELYIn6PpfG","type":"Entry","createdAt":"2025-02-05T09:59:10.921Z","updatedAt":"2025-02-05T09:59:10.921Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHeading"}},"locale":"en-US"},"fields":{"headingTitle":"2","headingNumber":2,"heading":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-3","data":{},"content":[{"nodeType":"text","value":"Employment","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7bf9O87zPzZFFQXdz2WMNM","type":"Entry","createdAt":"2025-02-05T09:59:10.937Z","updatedAt":"2025-02-05T09:59:10.937Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The second part of the dual mandate is sustainable employment, best measured through the unemployment rate. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"At 4.1% today, that’s towards the bottom end of the range over the last 50-years, although up from a low of 3.4% in April 2023. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"On this measure, you could argue there’s no need to cut rates and stimulate the economy.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7h8S8kwIYS5YYKxFb04vWz","type":"Entry","createdAt":"2025-02-05T09:59:10.983Z","updatedAt":"2025-02-05T09:59:10.983Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHeading"}},"locale":"en-US"},"fields":{"headingTitle":"3","headingNumber":3,"heading":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-3","data":{},"content":[{"nodeType":"text","value":"Inflation expectations ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6Ce7Kqh1zYyAG9oNgWwxNx","type":"Entry","createdAt":"2025-02-05T09:59:11.188Z","updatedAt":"2025-02-05T09:59:11.188Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Inflation becomes more of a problem when consumers expect it to persist. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The 2% inflation targets set by banks across the developed world help anchor expectations. If inflation picks up, people expect central banks to raise rates until inflation is brought back to target levels. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The New York Fed carries out a survey of consumers’ expectations of inflation five years out. This shows that expectations have been broadly steady, even through the inflation shock of 2022. 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","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"When a recession hits, unemployment tends to rise. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We expect the US to continue to outpace other developed world economies in 2025. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The New York Fed’s Nowcast measures current activity and is pointing to above-trend growth of 2.7% for the first quarter of 2025.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1pthseniLL7hi9Wk6PyGMl","type":"Entry","createdAt":"2025-02-05T09:59:11.234Z","updatedAt":"2025-02-05T09:59:11.234Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHeading"}},"locale":"en-US"},"fields":{"headingTitle":"5","headingNumber":5,"heading":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-3","data":{},"content":[{"nodeType":"text","value":"Financial conditions ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1JDMUgWzd6RbGcEY6CtVdl","type":"Entry","createdAt":"2025-02-05T09:59:11.294Z","updatedAt":"2025-02-05T09:59:11.294Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Fed looks at a variety of data to make sure financial markets are functioning effectively. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In particular, Fed officials worry about periods of financial stress. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Today, the US stock market is close to its all-time high. Credit spreads are also tight – meaning companies only pay a small premium over governments when they borrow. 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","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The inflation shock brought about by the pandemic and Russia’s invasion of Ukraine are the most obvious recent examples. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Today, we expect policy discussions to be dominated by domestic issues.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6djhBa4hWJqWtAEcGAzof6","type":"Entry","createdAt":"2025-02-05T09:59:11.339Z","updatedAt":"2025-02-05T09:59:11.339Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHeading"}},"locale":"en-US"},"fields":{"headingTitle":"7","headingNumber":7,"heading":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-3","data":{},"content":[{"nodeType":"text","value":"The current interest rate ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"54ycGh8OLe9MqsTQxmz9JX","type":"Entry","createdAt":"2025-02-05T09:59:11.354Z","updatedAt":"2025-02-05T09:59:11.354Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Members of the FOMC – the committee that sets interest rates – individually provide an assessment of where they see the long-term neutral interest rate to be. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If the economy is neither too hot nor too cold, this is the interest rate that should keep it there. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Most members see this rate as between 2.5% and 3%.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In conclusion, the fall in the headline rate of inflation over the last two to three years has brought the rate of inflation close to target levels. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"With interest rates well above their long-term neutral rate, this provides scope to cut. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But above-target core inflation, unemployment close to historical lows, above-trend economic growth and buoyant financial markets suggest there’s no need to cut now. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We expect US rates to remain on hold in the absence of a downturn in the economy from here.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, there is one factor that the markets are focused on that the Fed cannot – Trump’s tariffs. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Fed’s decisions are data dependent. They will have to wait for policy to change – and for its effects to be seen in the economy – before they react. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Markets, on the other hand, can price in expected changes overnight.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5vt7WRBKGHxfh4iVuyr9Wp","type":"Entry","createdAt":"2025-02-05T09:59:11.387Z","updatedAt":"2025-02-05T09:59:11.387Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"image":true,"position":"Pull out right"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"58ny1Q3cpOYPDO6VkxfBNS","type":"Entry","createdAt":"2025-02-05T09:59:11.412Z","updatedAt":"2025-02-05T09:59:11.412Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What about interest rates outside the US?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US generally tends to lead the way for global interest rates, but not every country is in the same boat. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Anaemic economic growth in Europe means there’s a more urgent need to cut rates. The same is true in China, where inflation is barely in positive territory – up 0.1% year-on-year in December. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"By contrast, we expect the next move by the Bank of Japan to be an increase in rates from their current level of 0.5%. That is well below inflation, at 3.6%.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What’s next for UK interest rates?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The UK’s growth outlook is similar to Europe, and we expect interest rates to fall. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A further rise in UK ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/gilts"},"content":[{"nodeType":"text","value":"government bond (gilt)","marks":[],"data":{}}]},{"nodeType":"text","value":" yields could push up interest payments to the point that they trigger a breaking of the chancellor’s fiscal rules. The government could respond by raising taxes or cutting spending. Either way, we would expect a bigger fall in interest rates than we’re currently pricing in.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The next ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bank-of-england"},"content":[{"nodeType":"text","value":"Bank of England","marks":[],"data":{}}]},{"nodeType":"text","value":" ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/base-interest-rate"},"content":[{"nodeType":"text","value":"base interest rate","marks":[],"data":{}}]},{"nodeType":"text","value":" decision is just a few days away and markets are expecting to see a 0.25% base interest rate cut.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"To make sure you don’t miss out on whether or not we see a rate cut, and what it could mean for you, ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/free-guides/editors-choice"},"content":[{"nodeType":"text","value":"sign up","marks":[],"data":{}}]},{"nodeType":"text","value":" to our weekly Editor’s Choice email. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We’ll send you our top investment stories from the week, every Saturday morning. 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However, it’s the fate of the G20 – 19 nations plus the European Union – that drives the global economy. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"They account for around two-thirds of the world’s population and around four-fifths of global economic activity. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Ahead of their annual summit, we’ve taken a look at the differing prospects for some of these main economies and markets – and the implications for investors.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. All investments can rise and fall in value, so you could get back less than you invest. If you’re not sure if an investment is right for you, ask for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/financial-advice"},"content":[{"nodeType":"text","value":"financial advice","marks":[],"data":{}}]},{"nodeType":"text","value":". Past performance isn’t a guide to the future.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"US","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US is exceptional on many levels. It’s the biggest economy in the world, its growth has outpaced other advanced economies over the last two years, and it’s expected to do so again in 2025.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Its stock market is home to nine of the world's top 10 companies – many seen as the expected winners from the potential of artificial intelligence (AI). And it accounts for nearly two thirds of the value of global equity markets. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, the market is also exceptionally expensive. And that means that investors will need to see the potential of AI realised in above-average earnings growth over the coming years. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The re-election of Donald Trump brings a new level of uncertainty. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In particular, we wait to see whether talked-about tariff hikes are fully implemented, and on who.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6NqDs69rQOrRkLns9KE1BI","type":"Entry","createdAt":"2024-11-14T11:00:53.087Z","updatedAt":"2024-11-14T11:00:53.087Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"image":false,"position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2agTvm5u1WyIlFKoMV6ePR","type":"Entry","createdAt":"2024-11-14T11:00:53.111Z","updatedAt":"2024-11-14T11:00:53.111Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Japan","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Japan tops the Economic Complexity index, which measures the number and complexity of export products. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This is reflected in the number of world class companies listed on the stock market. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The country offers great diversification benefits to investors because it’s at a different stage of its interest rate cycle. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We expect gradually increasing rates while most developed countries cut theirs.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6iKKTE4UYo37WUNgVVPeJd","type":"Entry","createdAt":"2024-11-14T11:00:53.125Z","updatedAt":"2024-11-14T11:00:53.125Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"image":false,"position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"58VkvojV8dBssEZIgtH4aI","type":"Entry","createdAt":"2024-11-14T11:00:53.150Z","updatedAt":"2024-11-14T11:00:53.150Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"India","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"India is the fastest growing economy in the G20 and we expect this growth premium to carry on for the next decade. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"What’s more, growth is primarily driven by domestic demand, so the economy is less sensitive to the ups and downs of the global economy than China or the developed world. 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","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The government has announced various stimulus measures that should provide some boost to the economy. 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","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The region’s producers of export goods, like cars, are more exposed to the growing competition from China, where the manufacturing industry is becoming more technologically advanced. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The European Union’s fiscal framework limits the scope for government spending to boost growth and this is one reason why we’re expecting lower interest rates in the future.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6AxhmrlQjA0WHBvYCz2SsF","type":"Entry","createdAt":"2024-11-14T11:00:53.310Z","updatedAt":"2024-11-14T11:00:53.310Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"image":false,"position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2OErn53s0S9xiAOlAGm4QY","type":"Entry","createdAt":"2024-11-14T11:00:53.336Z","updatedAt":"2024-11-14T11:00:53.336Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What’s next for commodity producers?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For the last 30 or 40 years, a building boom in China powered strong demand for commodities from Canada, Australia, South Africa, Argentina, Brazil, Mexico and Indonesia.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"51JlvnIHh4rg0fTVJIfh4Y","type":"Entry","createdAt":"2024-11-14T11:00:53.492Z","updatedAt":"2024-11-14T11:00:53.492Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"image":true,"position":"Pull out right"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1q4mymJBwaBsFV1knYkOI6","type":"Entry","createdAt":"2024-11-14T11:00:53.692Z","updatedAt":"2024-11-14T11:00:53.692Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The slowdown in China removes this tailwind and any further slowdown could affect demand here. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, it’s not all about China. 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","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Subdued growth, falling ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":", high debt levels, attractive valuations and a lack of world-beating technology companies makes the UK stock market look to us more like their European peers than the US. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But we see the economy as less vulnerable to the growing competition from China. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"And it could be seen as an island of political stability over the next five years.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4Gg6m97xCFG3oMp4bGpWfK","type":"Entry","createdAt":"2024-11-14T11:00:53.814Z","updatedAt":"2024-11-14T11:00:53.814Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"image":false,"position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7ItsHz2RmYOBlAccVgwYej","type":"Entry","createdAt":"2024-11-14T11:00:53.842Z","updatedAt":"2024-11-14T11:00:53.842Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What does all this mean for investors?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"All G20 economies are sensitive to global trends to differing degrees.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The backdrop is relatively slow economic growth, falling inflation, and high levels of government debt. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The whole world will feel the effects of a significant hike in US tariffs, if they’re implemented as set out in Donald Trump’s campaign speeches.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Still, these very different countries are exposed to a diverse range of risks. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For investors, risk and return are closely linked. 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","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Some analysts expect this to push up ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":" and lower global trade, and therefore reduce global economic growth – bad for stocks and bonds. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Higher tariffs favour domestic businesses over their overseas competitors. This would benefit smaller companies over their larger peers as they are, on average, more local operators.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"China is singled out for the biggest hikes. 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","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US is a major provider of arms to Ukraine. The war is a massive cost for Russia and Ukraine – in human and financial terms. And the front line has changed little for some time. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A negotiated settlement would be positive for the world economy and reduce the perceived risks in markets – but most importantly for the devastating human impacts we’ve seen so far.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We can also hope – but not expect - that a change of leadership in the US, whoever wins, can act as a catalyst for a more peaceful way forward for the Middle East. 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","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The outlook will also be affected by the results of elections for the House of Representatives and the Senate. The most likely outcome is a split decision, with no one party controlling the White House, the Senate and Congress. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, a clean sweep by either party is possible and then we’d expect an acceleration of their spending programmes. This would put upward pressure on bond yields – sending bond prices lower.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A final possibility is a contested result, with no clear – or agreed – winner. 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","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4nv0QcA49Mz1fA9u3xWfv8","type":"Entry","createdAt":"2024-10-08T15:17:34.688Z","updatedAt":"2024-10-08T15:17:34.688Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockQuote"}},"locale":"en-US"},"fields":{"text":"Like back then, we are seeing setbacks in global trade integration.","underline":false,"position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6aZbcJSRBSxUdBubn6Py9d","type":"Entry","createdAt":"2024-10-08T15:17:34.705Z","updatedAt":"2024-10-08T15:17:34.705Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Global trade matters. Over the last 50 years a boom in trade helped lift 1.5 billion people out of poverty. But today, wars, tariff increases, and vulnerable supply chains are a threat to global growth.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"War and tariff increases ended the first era of globalisation. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This era arguably started with Christopher Columbus’s discovery of America. World trade grew by 1% a year from 1500 to 1800. Trade growth accelerated in the late 19th century with the arrival of steam ships. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This expansion ended abruptly with the outbreak of the first world war. The downturn accelerated following the US Smoot-Hawley Tarriff act of 1930, which raised tariffs on thousands of goods, triggering similar rises among its trading partners. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"America’s imports and exports fell by two thirds during the Great Depression that followed, contributing to the downturn.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The second globalisation","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The foundations for today’s global economy were laid at the end of the second world war, which saw the creation of the United Nations, the World Bank and the International Monetary Fund. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In 1947, 23 nations signed The General Agreement on Tariffs and Trade (GATT) with the aim of substantially reducing tariffs and other barriers to trade. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In 1947 the average tariff was 22% and this had fallen to 5% by 1999. Today, there are 166 members of the World Trade Organisation, the successor to GATT. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The most important transformation of over the last 40 years has been the integration of China into the global economy. Together with the reintegration of Eastern Europe after the collapse of the USSR, the labour force enabling world trade doubled between 1991 and 2018.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Global supply chains","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Today, multinational companies take full advantage of our more connected world. They source components, manufacture goods and sell end products around the world. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This has been enabled by the combination of low tariffs, relatively low transportation costs and access to lower paid workers in emerging nations – particularly in China.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"From 1970 to 2008, the world experienced a period of ‘hyperglobalisation’, with world trade growth outpacing overall economic growth.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6zvIq5yWJzA0NN8FWJZ5Lx","type":"Entry","createdAt":"2024-10-08T15:17:34.727Z","updatedAt":"2024-10-08T15:17:34.727Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":27,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHighchart"}},"locale":"en-US"},"fields":{"chartId":"chart1","chartCode":"$28","source":"Source: World Bank and OECD National Accounts, September 2024","position":"Center"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7CyLWIoc4LSJVyBIwLx3ul","type":"Entry","createdAt":"2024-10-08T15:17:34.751Z","updatedAt":"2024-10-08T15:17:34.751Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This benefited the emerging world – with this growth estimated to have lifted 1.5 billion people out of poverty.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But it also came at a cost.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Blue-collar workers in the developed world fell behind on wage growth and faced increasing uncertainty on their job prospects. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The political consequences of these changes are beyond the scope of this article, but one definition of hyperglobalisation is globalisation that has gone too far.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Are we seeing globalisation in reverse?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The shutdown of the global economy in the pandemic alerted the world to the vulnerabilities of an economic system built around global supply chains. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For example, car factories halted production as they were unable to get hold of parts from other countries.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Russian invasion of Ukraine provided another shock to global trade. The most immediate impact was on the European consumers of Russian gas, with the taps turned off. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The longer-term issue for investors is what happens if China decides to forcefully retake Taiwan? The world is too integrated to fully contemplate the answer.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Governments are introducing industrial policies to support their domestic manufacturing industries. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US CHIPS Act of 2022, for example, provides government investment and tax credits to support domestic production of semiconductors. This is with the aim of reducing reliance on imports and create well-paid jobs. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Tariffs are also on the rise. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"China has invested heavily in electric vehicle technology, with government support. The country is now estimated to produce 9 million more cars than it buys. The US and European Union have responded to the threatened flood of competitively priced cars by hiking import taxes.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"These events have led investors to worry that globalisation is going into reverse. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In general, higher tariffs mean higher end prices. Less access to cheap goods from overseas also pushes up ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":". More friction in global trade means slower global growth – bad for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/shares"},"content":[{"nodeType":"text","value":"share","marks":[],"data":{}}]},{"nodeType":"text","value":" and ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bonds"},"content":[{"nodeType":"text","value":"bond","marks":[],"data":{}}]},{"nodeType":"text","value":" investors. ","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2nOicKnH3YyB6LJsnIixs3","type":"Entry","createdAt":"2024-10-08T15:17:34.771Z","updatedAt":"2024-10-08T15:17:34.771Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"image":true,"position":"Pull out right"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4Mjwpu1ILbYCVlWLi1go1m","type":"Entry","createdAt":"2024-10-08T15:17:34.833Z","updatedAt":"2024-10-08T15:17:34.833Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":9,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What’s next and should investors worry?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Global trade has stabilised at a high level since 2008. Global supply chains are now mature, but there are few signs that they’re being unwound. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Some manufacturers are marginally reducing their reliance on China as a manufacturing centre, but this typically means locating some production in another country with low labour costs. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Apple and Samsung now make some phones in India, for example. So, the impact on the overall level of global trade is minimal. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The nature of global trade has changed too. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Trade in services has grown faster than trades in goods. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In the United States and the UK, investment in intangible assets now exceeds that in tangible assets. Correctly capturing the traded value of brand values and software solutions is challenging.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The biggest immediate threat to world trade is the tax plans of Donald Trump – if he’s elected and implements the full extent of tariff hikes he’s talked about in his presidential campaign.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For investors, we see three key takeaways.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4N5FGJvsE8hgmoiByBXBZ8","type":"Entry","createdAt":"2024-10-08T15:17:34.852Z","updatedAt":"2024-10-08T15:17:34.852Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":6,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHeading"}},"locale":"en-US"},"fields":{"headingTitle":"1","headingNumber":1,"heading":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The rapid rise in globalisation is over. This removes an important driver of global economic growth and low inflation over the last two generations.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"ibCsJYq1uwvDRNHVLTuMz","type":"Entry","createdAt":"2024-10-08T15:17:34.872Z","updatedAt":"2024-10-08T15:17:34.872Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":6,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHeading"}},"locale":"en-US"},"fields":{"headingTitle":"2","headingNumber":2,"heading":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, the global supply chains put in place aren’t expected to go into a rapid reverse. While further globalisation might be limited, the threat of deglobalisation is not significant – for now.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1TuUV2MH7TCy82Xw20fiSw","type":"Entry","createdAt":"2024-10-08T15:17:34.934Z","updatedAt":"2024-10-08T15:17:34.934Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A significant hike in US tariffs could change this picture. It would likely lead to tit-for-tat policy moves from trading partners. This would be put upward pressure on inflation and downward pressure on economic growth. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The likelihood of this risk materialising is hard to gauge. So it’s important for investors to keep a close eye on the upcoming ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/news/us-election-2024"},"content":[{"nodeType":"text","value":"2024 US Election","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2sGI1ducmExSTZRIhowVq8","type":"Entry","createdAt":"2024-10-08T15:17:34.951Z","updatedAt":"2024-10-08T15:17:34.951Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockInfoBox"}},"locale":"en-US"},"fields":{"title":"2024 US Election – how to stay updated","infoSummary":{"data":{},"content":[{"data":{},"content":[{"data":{},"marks":[],"value":"As the race to the White House between Trump and Harris heats up, make sure you don’t miss out on our latest expert insights and US investment ideas, by signing up to our weekly Editor’s choice email.","nodeType":"text"}],"nodeType":"paragraph"}],"nodeType":"document"},"ctAs":[],"position":"Inline","style":"fill"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7hH8LgM9OAJFTwD3j0J8Rv","type":"Entry","createdAt":"2024-10-08T15:17:35.045Z","updatedAt":"2024-10-08T15:17:35.045Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":6,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHeading"}},"locale":"en-US"},"fields":{"headingTitle":"3","headingNumber":3,"heading":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Finally, while the world’s politicians might choose to focus on domestic investment, investors should continue to diversify globally – across countries, industries and asset classes.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6Ckt9UKqYGTHWgoYCXq2mf","type":"Entry","createdAt":"2024-10-08T15:17:35.064Z","updatedAt":"2024-10-08T15:17:35.064Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockCta"}},"locale":"en-US"},"fields":{"linkType":"secondaryButton"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5cGByPuVzMdj3tZz2L6BwF","type":"Entry","createdAt":"2024-10-08T15:17:35.127Z","updatedAt":"2024-10-08T15:17:35.127Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":7,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"image":false,"position":"Inline"}}],"authors":["$10:props:data:authorArticles:0:fields:authors:0"],"newsLetterSignUp":"$10:props:data:authorArticles:0:fields:newsLetterSignUp","dropCap":"Standard","metadata":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5gWcEQy9Z6OzDH8A85Q9z3","type":"Entry","createdAt":"2024-10-08T15:17:35.165Z","updatedAt":"2024-10-08T15:17:35.165Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"pageMetadata"}},"locale":"en-US"},"fields":{"seoTitleTag":"Should investors be worried about deglobalisation? | Hargreaves Lansdown","seoMetaDescription":"What is deglobalisation, what could it mean for shares and bonds and is it a risk to investors?","seoIndexingRules":"index,follow","snippetSettings":true,"openGraphType":"website","twitterCardType":"summary_large_image"}},"showImageOnArticle":true,"featuredImage":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"56pCe04LWG2fMmZxxIKhc5","type":"Asset","createdAt":"2024-10-08T08:32:38.090Z","updatedAt":"2024-10-08T08:32:38.090Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"locale":"en-US"},"fields":{"title":"Aerial view of a cargo ship in a thriving harbor- GettyImages","description":"The expansive view showcases the maritime world in action, with the cargo ship gliding through the harbor against a backdrop of industry and trade. ","file":{"url":"//images.hl.uk/vvl3z0p6qtad/56pCe04LWG2fMmZxxIKhc5/45467ef51e2ef47b3483f7771a1b16a8/Aerial_view_of_a_cargo_ship_in_a_thriving_harbor-_GettyImages.jpg","details":{"size":1599830,"image":{"width":1260,"height":840}},"fileName":"Aerial view of a cargo ship in a thriving harbor- GettyImages.jpg","contentType":"image/jpeg"}}}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2XzrNNVqJQ80dUu4QFI3qC","type":"Entry","createdAt":"2024-08-20T13:03:25.675Z","updatedAt":"2024-08-21T14:17:21.745Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":24,"revision":2,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"article"}},"locale":"en-US"},"fields":{"theme":"Clifton Navy","titleAndPath":"How to follow economics – resources for investors [@ how-to-follow-economics-resources-for-investors]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"The good news for investors is economics can be a very accessible subject. Here are the freely available resources I use to form my view on the economic outlook.","publishedDate":"2024-08-20","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":false,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4lgnzsusRQnafGgEzenupV","type":"Entry","createdAt":"2024-08-20T13:03:25.849Z","updatedAt":"2024-08-20T13:03:25.849Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Global government debt levels have risen to unprecedented peacetime levels. And the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/base-interest-rate"},"content":[{"nodeType":"text","value":"interest rates","marks":[],"data":{}}]},{"nodeType":"text","value":" rises over the last two years means governments will spend more and more on servicing these debts. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US Congressional Budget Office forecasts that debt relative to the size of the economy will steadily rise over the next generation due to the rising costs of an ageing population. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But how will governments reduce this debt? ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"By running budget surpluses? Allowing higher inflation? Or restructuring the debt – possibly after a crisis?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Last August, central bankers, government officials, leading economists, and other leaders from the world of finance gathered in Jackson Hole, USA. Meeting for the annual symposium of the Kansas City Federal Reserve – think a highly select Glastonbury-equivalent for the world’s top economists. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Professor Barry Eichengreen of UC Berkeley, a renowned expert on the global monetary system, presented a paper on ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.kansascityfed.org/Jackson%20Hole/documents/9749/Living_With_High_Public_SA_Sep_2_2023.pdf"},"content":[{"nodeType":"text","value":"Living with High Government Debt","marks":[{"type":"italic"}],"data":{}}]},{"nodeType":"text","value":". ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Like most people, I’m not a trained economist, so I like experts who can explain complex issues in plain English.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Below are some of the economic resources I use, almost all of which can be accessed for free. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. If you’re not sure what’s right for you, ask for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/financial-advice/retirement-advice-services"},"content":[{"nodeType":"text","value":"financial advice","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1eVsTMeTTnSyMFBm1RsqQF","type":"Entry","createdAt":"2024-08-20T13:03:25.873Z","updatedAt":"2024-08-20T13:03:25.873Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":9,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Jackson Hole Symposium ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The next ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.kansascityfed.org/research/jackson-hole-economic-symposium/"},"content":[{"nodeType":"text","value":"Jackson Hole Symposium","marks":[],"data":{}}]},{"nodeType":"text","value":" is this week, starting 22 August until 24 August. You can watch US ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/federal-reserve"},"content":[{"nodeType":"text","value":"Federal Reserve","marks":[],"data":{}}]},{"nodeType":"text","value":" governor Jay Powell’s address live on YouTube, it’s one of the most anticipated events in the economic calendar.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Academic papers are released throughout the weekend, ranging from historical perspectives to highly technical papers. 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[@ global-inflation-results-what-do-they-mean-for-interest-rates]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"Inflation is above target levels in the US, UK and Europe, but it’s trending lower. What does this mean for interest rates?","publishedDate":"2024-08-19","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":false,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1eIMTVZuvZXlfybReA2NVt","type":"Entry","createdAt":"2024-08-19T16:28:51.874Z","updatedAt":"2024-08-19T16:28:51.874Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In the UK, the headline ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=Consumer%20Price%20Index,risen%20over%20time."},"content":[{"nodeType":"text","value":"Consumer Price Index","marks":[],"data":{}}]},{"nodeType":"text","value":" (CPI) rose to 2.2%, driven mainly by energy prices, since they fell less than the previous month. Meanwhile, household durable goods costs fell for the third month running.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Services inflation is still uncomfortably high at 5.2% and we expect this will prevent back-to-back ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/base-interest-rate"},"content":[{"nodeType":"text","value":"interest rate","marks":[],"data":{}}]},{"nodeType":"text","value":" cuts by the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bank-of-england"},"content":[{"nodeType":"text","value":"Bank of England","marks":[],"data":{}}]},{"nodeType":"text","value":" (BoE. However, this figure was down from 5.7% in June and below analyst’s expectations. Services are labour intensive and annual wage growth is running at 5.4%. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Core inflation, which excludes food and energy, was 3.3% – its lowest level since September 2021.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. Unlike the security offered by cash, investments rise and fall in value, so you could get back less than you invest. If you’re not sure if an investment is right for you, ask for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/financial-advice"},"content":[{"nodeType":"text","value":"financial advice","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5JyIZuZsb4USIDRBNmgTZT","type":"Entry","createdAt":"2024-08-19T16:28:51.902Z","updatedAt":"2024-08-19T16:28:51.902Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"image":true,"position":"Pull out right"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"751YKMF3ktyN30EqGR1Sod","type":"Entry","createdAt":"2024-08-19T16:28:51.945Z","updatedAt":"2024-08-19T16:28:51.945Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":9,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What’s happened to US inflation?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Over in the US, inflation fell from 3.0% to 2.9%, the first time that headline inflation was below 3% since March 2021. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Core CPI nudged lower, from 3.3% to 3.2%. The producer price inflation index increased 2.2%, down from 2.7% in June. A quarter of the July increase was due to a 2.8% rise in gasoline prices.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"US ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/stock-market"},"content":[{"nodeType":"text","value":"stock markets","marks":[],"data":{}}]},{"nodeType":"text","value":" weren’t really affected by these releases, which were broadly in line with expectations. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Weak employment data last week led markets to price in a 0.5% cut in interest rates from the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/federal-reserve"},"content":[{"nodeType":"text","value":"Federal Reserve","marks":[],"data":{}}]},{"nodeType":"text","value":" on 18 September. But expectations have since shifted back to a 0.25% cut – unless there’s any more weak data.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"The global view","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Elsewhere, inflation in the Eurozone fell below 3% back in October 2023. The July release of 2.6% was up from 2.5% the previous month. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Japanese inflation of 2.9% is now in line with US price rises and above the levels in Europe and the UK. This is in stark contrast to their battle with ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/deflation"},"content":[{"nodeType":"text","value":"deflation","marks":[],"data":{}}]},{"nodeType":"text","value":" for much of the last 25 years. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"By contrast, the ongoing problems in the Chinese property market are weighing on consumer sentiment. This has kept China’s inflation below 1% over the last 12 months, with prices rising 0.5% year-on-year in July.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Inflation releases of 4.5% in Brazil, 3.5% in India, 2.1% in Indonesia and 5.6% in Mexico show the recovery from double-digit inflation has happened across a lot of emerging markets too. But there are exceptions, where economic imbalances are more severe, notably Argentina (272% in June) and Turkey (62% in July).","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What does this mean for global interest rates?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The supply shocks of the pandemic are now a distant memory. Goods price inflation is in negative territory in the UK. However, wage inflation is stickier, rising and falling at a slower rate than consumer and producer prices. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Interest rate changes are typically about a year delayed and we expect improvement in almost all measures of inflation over the last year to continue. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Base effects mean we’re likely to see ups and downs in the headline inflation rate over the coming months. But we expect core inflation to trend towards target levels.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"So, this should let the UK, US and Eurozone central banks make more rate cuts. Real interest rates (central bank base rates minus inflation) are high right now, so there’s scope for lowering interest rates over the coming months.The current BoE rate of 5% is nearly 3% higher than the rate of inflation, at 2.2%. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This could change if the global economy unexpectedly slows, or if the improvement in core inflation reverses. And high levels of wage and service price inflation will curb the pace of cuts. We see these as risks to an improving outlook for inflation with steady economic growth.","marks":[],"data":{}}]}]}}}],"authors":["$10:props:data:authorArticles:0:fields:authors:0"],"newsLetterSignUp":"$10:props:data:authorArticles:0:fields:newsLetterSignUp","dropCap":"Standard","metadata":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7oQFUmoo1g2mK7MmzBYG1b","type":"Entry","createdAt":"2024-08-19T16:28:51.968Z","updatedAt":"2024-08-19T16:28:51.968Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"pageMetadata"}},"locale":"en-US"},"fields":{"seoTitleTag":"Global inflation results – what do they mean for interest rates? | HL ","seoMetaDescription":"Inflation is above target levels in the US, UK and Europe, but it’s trending lower. 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[@ whats-next-for-global-interest-rates-in-2024]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"What could rate cuts mean for stock markets in 2024? We take a closer look and share where global interest rates could go from here. ","publishedDate":"2024-08-06","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":false,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"ZdDZCPokSJciLi58hHozx","type":"Entry","createdAt":"2024-08-06T11:00:45.598Z","updatedAt":"2024-08-06T11:00:45.598Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":12,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Central banks have become increasingly data dependent in their decision making. Yet the big shifts in ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/monetary-policy"},"content":[{"nodeType":"text","value":"monetary policy","marks":[],"data":{}}]},{"nodeType":"text","value":" are often due to surprise events. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Last week the ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/news/interest-rates-cut-to-5-what-it-means-for-savings-and-annuities"},"content":[{"nodeType":"text","value":"Bank of England cut interest rates to 5%,","marks":[],"data":{}}]},{"nodeType":"text","value":" the US Federal Reserve (Fed) held steady and the Bank of Japan raised rates. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"So, what do interest rate moves mean for investors?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Interest rate hikes and cuts matter. When rates fall, ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bonds"},"content":[{"nodeType":"text","value":"bond","marks":[],"data":{}}]},{"nodeType":"text","value":" prices typically rise. This is because investors will earn less on newer bonds with lower coupons, encouraging investors to buy the bonds already in issue at a higher price.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Lower rates are also positive for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/shares"},"content":[{"nodeType":"text","value":"shares","marks":[],"data":{}}]},{"nodeType":"text","value":". Future earnings are discounted at a lower rate, boosting their current value. Companies borrowing costs fall too. And lower rates are positive for the economic outlook – and therefore future earnings growth.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Data dependent decisions","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For investors, knowing what data central bankers are focused on can help them understand – and even anticipate – rate changes. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"However, data is backward looking and takes time to collate. Therefore, central banks must make decisions based on information that’s already out of date. This makes it more likely that they’ll be slow to react.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"Inflation","marks":[],"data":{}}]},{"nodeType":"text","value":" in the Eurozone fell into negative territory in 2020 at the start of the pandemic. The central bank and governments reacted to the crisis by easing monetary policy and boosting spending. But these policies, combined with supply bottlenecks caused by the shutdown, triggered a sharp rise in prices. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Inflation exceeded the European Central Bank’s (ECB) 2% target in July 2021, doubled to over 4% by October, and doubled again to over 8% in May 2022. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Yet the ECB first raised rates in July 2022, from -0.5% to 0%. Rates were raised 10 more times, taking the rate to 4.5% in September 2023. Meanwhile, inflation peaked at 10.6% in October 2022 and is now 2.6%, marginally above the target level.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The point of this example isn’t to say that there was a policy error. The pandemic-led shutdown and re-opening of the global economy was impossible to model. In fact, economists were telling us that policy was too tight or too restrictive over this period. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Instead, we’re highlighting that there was no obvious link between the most important datapoint for the ECB – the inflation rate – and its policy decisions. The big rise in rates was driven by a surprise increase in consumer prices – not evident in any backward-looking data.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What drives interest rates?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In practice, the big shifts in central bank rates over the last generation have mostly been driven by the unexpected – the bursting of the dotcom bubble, the global financial crisis and the recent inflation spike.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The dotcom bubble burst in March 2001 and a ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/recession"},"content":[{"nodeType":"text","value":"recession","marks":[],"data":{}}]},{"nodeType":"text","value":" followed. The US Federal Reserve funds rate was 5% at the time and was cut incrementally down to 1% by June 2003. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In 2007 problems emerged in the US sub-prime mortgage market. This triggered a tightening of financial conditions around the globe that led to the failure of Northern Rock in the UK – and the collapse of Lehman Brothers a year later which was the landmark event in the global financial crisis. The US Fed funds rate was cut from 5.25% in August 2007 incrementally down to 0.125% in December 2008.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The recent inflation crisis has seen a similar magnitude of change, but in the opposite direction. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US Fed funds rate was raised from 0.125% in January 2022 to its current level of between 5.25% - 5.50% in July 2023.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The only exception to this crisis-led response was during the economic recovery from the technology bubble. The US Fed raised rates by a quarter percent at every meeting between May 2004 and June 2006. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We could argue that this gradual approach reduced the perceived risks for borrowers – and helped sustain the US housing bubble that led to the sub-prime crisis.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"When words matter","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Investors are forward looking, anticipating future rate changes by central banks. When rate announcements are in line with expectations, stocks and bonds tend to move little.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This also means that words alone can be enough to move markets. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In December 2023, the Fed pivoted its messaging from fighting inflation to signalling that rate cuts were coming. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The market reacted by pricing in seven rate cuts in 2024 – this despite the Fed projecting just three. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Stock and bond prices rose, pushing down borrowing costs. And this easing of financial conditions has helped sustain steady growth in the US economy. This resilient economic performance has delayed the first cut in rates well beyond that expected immediately after the pivot.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Thinking in scenarios","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Many market watchers are busy analysing last week’s decisions from the US Fed and the Bank of England. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"At the time of writing, the market is pricing just over a 50% chance of three cuts in the US between now and the end of the year. But for long-term investors, the exact timing and number of rate moves over the near term is largely irrelevant.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Instead, we encourage investors to think about possible scenarios over the longer term.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"At one extreme, we could see a return to the pre-pandemic environment. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In this scenario, a combination of continued slow productivity gains, an ageing population and effective inflation targeting by central banks keeps inflation low and sees rates fall back towards zero. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Government bonds would be expected to perform well in this scenario – of course there are never any guarantees though.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"At the other end of the spectrum, the fall in the working age population as a percentage of the total puts upward pressure on wages. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Deglobalisation makes it harder to source cheaper goods and services from abroad. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"High debt servicing costs also make it challenging for central banks to raise rates sufficiently to bring core inflation – and inflation expectations – back to target levels. This pushes inflation higher and central banks are eventually forced to raise rates above current levels. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Bonds and stocks would be expected to suffer in this environment, with real assets like gold and commodities offering potential shelter. This too is unlikely as it implies that central banks are largely ignoring their inflation-targeting mandate.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Investors need to be prepared","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Forecasting economic outcomes is hard. The old joke goes that economists have forecast nine of the last five recessions. Turning these forecasts into reliable market predictions is even harder.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A third scenario, and in my view the most likely outcome, is somewhere between the two extremes described above. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This outcome would see rates come down, but settle well above the levels of the decade before the pandemic.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Whatever happens to rates next, investors will be better prepared if they understand the risks to their portfolios if interest rates surprise in either direction – it’s important to have a diversified portfolio so you have something performing in all scenarios.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6IiP3Iwijk0kAztXZ4dhAi","type":"Entry","createdAt":"2024-08-06T11:00:45.643Z","updatedAt":"2024-08-06T11:00:45.643Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockCta"}},"locale":"en-US"},"fields":{"linkType":"link"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"3w8Ty7HJF7z06isYQGTG5c","type":"Entry","createdAt":"2024-08-06T11:00:45.672Z","updatedAt":"2024-08-06T11:00:45.672Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":6,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. 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[@ buying-uk-government-bonds-in-2024-should-you-lend-to-the-uk-government]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"When buying government bonds, it’s good to know what’s being done with your money. Here’s what the UK government is spending. ","publishedDate":"2024-05-23","categories":["$10:props:data:authorArticles:0:fields:categories:0","$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":false,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"71E1dncbCjh1art4iAN5JG","type":"Entry","createdAt":"2024-05-23T08:59:52.296Z","updatedAt":"2024-05-23T08:59:52.296Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"When you buy UK ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=Government%20Bonds%20(gilts,known%20as%20gilts."},"content":[{"nodeType":"text","value":"government bonds (gilts","marks":[],"data":{}}]},{"nodeType":"text","value":"), you’re lending money to the government. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"As with all lending, it’s good to understand what the money is being used for and how the borrower plans to repay you. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In the book ‘","marks":[],"data":{}},{"nodeType":"text","value":"Follow the Money’","marks":[{"type":"italic"}],"data":{}},{"nodeType":"text","value":", Paul Johnson, Director of the IFS think tank, looks at how the UK government taxes us and spends the money.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. All investments, and any income from them can rise and fall in value, so you could get back less than you invest. 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Nearly two-thirds came from just three sources – income tax, national insurance contributions and VAT. And income tax alone counted for over a quarter of all revenues. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In 1799, William Pitt the Younger introduced income tax to help pay for the Napoleonic War. It was officially abolished after the victory at Waterloo. Robert Peel ‘temporarily’ brought it back 27 years later in 1842 – and it’s been with us ever since.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The taxes that most directly hit investors are capital gains tax (which raised £16bn) and inheritance tax (£7bn). Together this was less than 3% of the total raised. However, investors in company stocks also contributed through their share of the £66bn raised through corporation tax.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What is the UK government spending its money on?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The table below sets out the main areas of government 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"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"69ohOg10HUzhAhEk0J01hC","type":"Entry","createdAt":"2024-05-23T08:59:52.605Z","updatedAt":"2024-05-24T08:45:43.099Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":9,"revision":2,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"*Including tuition fee loans.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"When households plan their budget, they usually split their spending between essentials, like bills, and discretionary spending, like holidays. When times are tough, households can then cut back on their discretionary spending. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"That isn’t an option for governments. All the big spending categories are essentials. And governments typically increase spending during economic downturns, to support the economy and meet the growing needs of the unemployed. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But one department has seen steady cuts over the last 75 years, helping balance growing needs elsewhere – defence. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"During the Korean War in the 1950s, we spent a tenth of national income on our army, navy, and air force. Today it’s just two percent. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This peace dividend is clearly over.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What is happening to UK borrowing?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In the last tax year, the UK government borrowed £121bn. Its budget deficit (the difference between spending and the income received) was 4.4% of gross domestic product (GDP). That’s well over the 3% average of the five years before the pandemic. This took public sector debt to 98% of GDP.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This borrowing is nothing new. We’ve spent more than we have raised in 99 of the 123 years since the start of the 20th century.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Still, the cost of borrowing right now is high. At some point governments will look to rein in borrowing – perhaps in response to bond market turmoil, like with the Kwarteng/Truss budget. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"So, what can they do?","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"How can the UK government balance the books?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Paul Johnson suggests lots of ways the system could be better. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But the story of universal credit highlights how difficult it is to bring about change.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The idea was to replace the range of different benefits for the unemployed, the sick, and the poor. The then Conservative and opposition leader Iain Duncan Smith came up with the idea in 2002. He was appointed Secretary of State for Work and Pensions in 2010 and made delivering universal credit his number one priority. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"And yet a policy, originally meant to be completed by 2017, isn’t expected to be fully rolled out until the second half of this decade. A whole generation after the idea was first conceived.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"With no obvious ways to cut spending, the alternative is higher taxes. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Johnson sees these as almost certain. ","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5ErOYSpYCZxKnjqrm7mnZJ","type":"Entry","createdAt":"2024-05-23T08:59:52.700Z","updatedAt":"2024-05-23T08:59:52.700Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockQuote"}},"locale":"en-US"},"fields":{"text":"“Poor growth, an ageing population, an ever-voracious NHS, and little prospect of big spending cuts elsewhere are likely to make sure of that.” ","underline":false,"position":"Inline"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5ctvSyywYpzYQc4VXBO9A5","type":"Entry","createdAt":"2024-05-23T08:59:52.799Z","updatedAt":"2024-05-23T08:59:52.799Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"He points out that our tax burden still isn’t especially high by western European standards.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Throughout history, the UK government has relied on its ability to borrow large sums of money quickly to respond to a crisis. Investors who provide this capital need to be confident they’ll be paid back – and that ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":" won’t erode their returns. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Government bonds provide a secure source of income and a good diversifier to shares. But do keep an eye on the books. ","marks":[],"data":{}},{"nodeType":"text","value":"Follow the Money","marks":[{"type":"italic"}],"data":{}},{"nodeType":"text","value":" will help you understand why. And, despite the gloomy message, it’s an enjoyable read too.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"114YBDjJLaiveMhDJdwH6l","type":"Entry","createdAt":"2024-05-23T08:59:52.820Z","updatedAt":"2024-05-23T08:59:52.820Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockEditorialArticle"}},"locale":"en-US"},"fields":{"article":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"5oz73aYQeJ7YaglFNvKPcb","type":"Entry","createdAt":"2024-03-27T12:10:27.221Z","updatedAt":"2024-03-28T10:14:16.001Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":24,"revision":2,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"article"}},"locale":"en-US"},"fields":{"theme":"Clifton Navy","titleAndPath":"Investing for income – what to consider? Plus 3 fund ideas [@ investing-for-income-what-to-consider-plus-3-fund-ideas]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"A balanced mix of global stocks and global bonds today could offer an income yield of around 3%. We look at the risks and opportunities when investing for income, plus share three fund ideas.","publishedDate":"2024-03-27","categories":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"3eJEoGmsYEUE2V6Dvj9m9Q","type":"Entry","createdAt":"2023-11-14T09:49:54.375Z","updatedAt":"2024-01-17T09:08:30.867Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":16,"revision":4,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"category"}},"locale":"en-US"},"fields":{"titleAndPath":"Fund investment ideas [@ news/fund-investment-ideas]","parentCategory":"$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory","mobileCategoryId":"fundIdeas"}},"$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory"],"featureArticle":false,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"D1m5ixLeSzlIBXqqTiMai","type":"Entry","createdAt":"2024-03-27T12:10:28.068Z","updatedAt":"2024-03-27T12:10:28.068Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":4,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Income investors had a tough time in the aftermath of the 2008 global financial crisis. This was a period of slow economic growth and low ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":". The Bank of England's (BoE) ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/base-interest-rate"},"content":[{"nodeType":"text","value":"base interest rate","marks":[],"data":{}}]},{"nodeType":"text","value":" fell below 1% in March 2009 and stayed there until May 2022. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Low central bank interest rates then led to low bond ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/yields"},"content":[{"nodeType":"text","value":"yields","marks":[],"data":{}}]},{"nodeType":"text","value":". ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"It’s true that the yield on UK shares fell less than cash and bond yields between 2009 and 2022. But shares are typically more ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=Volatility,than%20you%20invested."},"content":[{"nodeType":"text","value":"volatile","marks":[],"data":{}}]},{"nodeType":"text","value":" than ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/bonds"},"content":[{"nodeType":"text","value":"bonds","marks":[],"data":{}}]},{"nodeType":"text","value":". ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Recent performance has been led by the “magnificent seven”, seven ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/shares/stock-market-summary/nasdaq"},"content":[{"nodeType":"text","value":"NASDAQ","marks":[],"data":{}}]},{"nodeType":"text","value":" listed companies expected to benefit from the growth in artificial intelligence. Below is the yield on a portfolio of 55% global equities and 45% global broad market bonds.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"3cNuyWwjLQuHEZeYI0Gs1x","type":"Entry","createdAt":"2024-03-27T12:10:28.225Z","updatedAt":"2024-03-27T12:10:28.225Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":8,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockHighchart"}},"locale":"en-US"},"fields":{"chartId":"chart1","chartCode":"$29","disclaimer":"Past performance isn’t a guide to future returns.","source":"Source: ICE, MSCI, Datastream. Equities are represented by MSCI ACWI index. Bonds are represented by ICE Global Broad Markets index. We estimate this mix has 60% of the expected volatility of global equities. 29/02/2024","position":"Center"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"3fNY1mlxzos2saTwTNBd3V","type":"Entry","createdAt":"2024-03-27T12:10:28.246Z","updatedAt":"2024-03-27T12:10:28.246Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A bout of double-digit inflation triggered a reset in yields. It also led to the worst annual return on UK government bonds since 1900. From a peak in May 2020, the market recorded a real loss – adjusted for inflation – of 52%.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Today, the starting point for income investors looks less challenging. The BoE base rate is 5.25%. UK 10-year government bonds yield around 4%. And UK shares currently offer a prospective yield of 3.8%. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Long-term investors should be careful about being overly attracted to the current high yield on cash deposits. We expect the BoE to cut rates as inflation falls back towards target. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"So, while we think the one-year savings rate is attractive right now, the rate available once that period finishes could be lower. And we expect government bonds to offer a higher return over the next 10 years, although there are no guarantees. Yields are variable, not guaranteed, nor a reliable indicator of future income. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"How is this different for cash, bonds, and shares?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"In contrast to cash or bonds, investing in shares brings the potential for income growth. Corporate earnings are expected to grow in line with nominal Gross Domestic Product (GDP) over the long term – and a proportion of these earnings are paid out as dividends.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This economic link offers some shelter against inflation from an income perspective. As prices rise, so do overall corporate earnings. However, high levels of inflation are bad news for total stock and bond returns. That’s because they put downward pressure on valuations.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"An income portfolio blending shares and bonds can offer potential for a sustainable income that keeps pace with inflation over the long term. It also has ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/diversification"},"content":[{"nodeType":"text","value":"diversification","marks":[],"data":{}}]},{"nodeType":"text","value":" benefits, lowering expected volatility over the long term. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Bonds typically offer shelter in a ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/recession"},"content":[{"nodeType":"text","value":"recession","marks":[],"data":{}}]},{"nodeType":"text","value":", when share prices have suffered. But shares and bond have sometimes moved in the same way – and both usually suffered when inflation spikes unexpectedly.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Bonds have typically offered a higher yield than shares and a more secure income stream. But shares can offer potential for long-term growth in income and capital. The right mix of both is a key investment decision and as with any investment there are no guarantees. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Share portfolios can be diversified across different countries, industries, and companies. Bonds are issued by governments and companies, in developed and emerging markets, offering fixed-income or inflation-linked payments, and in varying levels of credit quality.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A portfolio invested in a mix of shares and bonds can offer investors opportunities to get a reasonable income, and potential returns to keep in pace with inflation.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"One way to achieve this might be through investing in a number of funds that invest in shares and bonds, rather than buying the individual securities. There are also funds available that invest in a combination of shares and bonds on behalf of investors which may suit a portfolio. Below we have a look at 3 fund ideas to consider. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. Unlike the security offered by cash, investments and any income they produce will rise and fall in value, meaning you could get back less than you invest. If you’re not sure if an investment is right for you, seek advice. Remember, past performance is not a guide to the future.","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"3 income fund ideas","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/diversification"},"content":[{"nodeType":"text","value":"diversified","marks":[],"data":{}}]},{"nodeType":"text","value":" portfolio. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For more details on each fund and its risks, you can use the links to their factsheets and key investor information below. ","marks":[],"data":{}}]},{"nodeType":"heading-3","data":{},"content":[{"nodeType":"text","value":"A ready-made mixed asset fund","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Investing in a mixed asset fund means you get a lot of diversification from a single investment. It also means you have a professional fund manager changing the amount invested in shares and bonds over time, dependent on what they think are the best opportunities. This means less ongoing portfolio management for the investor.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"59L8pESxuMEOrBPPGWSzvZ","type":"Entry","createdAt":"2024-03-27T12:10:28.320Z","updatedAt":"2024-03-27T12:10:28.320Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":7,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContentWithCompanyInformation"}},"locale":"en-US"},"fields":{"sedol":"BFXY285","investmentType":"fund","content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-4","data":{},"content":[{"nodeType":"text","value":"Baillie Gifford Sustainable Income","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/b/baillie-gifford-sustainable-income-class-b-income"},"content":[{"nodeType":"text","value":"Baillie Gifford Sustainable Income","marks":[],"data":{}}]},{"nodeType":"text","value":" is equally split across three broad investment areas – shares, bonds and real assets – property and infrastructure, accessed through listed companies. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The fund aims to increase how much it pays to investors by more than the increase in the consumer prices index (inflation), over the long term. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This means the fund focuses on providing a resilient income over time. While the income provided by this fund might not be the highest, the focus on income across everything it invests in means you can expect it to be more consistent.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This fund is one of Baillie Gifford’s sustainably labelled funds, meaning that ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/esg-investing"},"content":[{"nodeType":"text","value":"Environmental Social and Governance","marks":[],"data":{}}]},{"nodeType":"text","value":" (ESG) considerations are a meaningful part of how they assess investments for it.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The fund invests in emerging markets, high yield bonds and uses derivatives, all of which add risk. The fund takes charges from capital, which can increase the potential income paid, but reduce the potential for capital growth.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We think this fund could be used to provide diversification to a portfolio focused on growth, or be a useful addition to a portfolio focused on income.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Please note that this fund invests in HL shares.","marks":[],"data":{}}]}]},"emailSignUp":"false"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"6G4HxE8iuAfidAx3r4LuIr","type":"Entry","createdAt":"2024-03-27T12:10:28.352Z","updatedAt":"2024-03-27T12:10:28.352Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":3,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-3","data":{},"content":[{"nodeType":"text","value":"Funds to consider for building your own mixed asset portfolio","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"If you want more control over your investment ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/risk"},"content":[{"nodeType":"text","value":"risk","marks":[],"data":{}}]},{"nodeType":"text","value":", you might want to pick individual share and bond funds in proportions that fit your specific investment goals. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"One thing to think about is investors need to keep an eye on performance of the funds over time, to make sure they still have the right amount invested in shares and bonds overall. 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","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We think a corporate bond fund could be a good addition to a diversified portfolio looking to generate income.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We rate the managers of ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/a/artemis-corporate-bond-class-i-accumulation"},"content":[{"nodeType":"text","value":"Artemis Corporate Bond","marks":[],"data":{}}]},{"nodeType":"text","value":", Stephen Snowden and Grace Le, highly. Snowden’s a seasoned corporate bond investor with over 20 years experience. While Le has less experience, she’s shown herself a highly competent investor so far. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The fund can, and does, invest in some higher yield bonds that have lower credit ratings. This is a higher risk approach than some others. 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","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"But, when professors at London Business School studied the link between economic growth and ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/stock-market"},"content":[{"nodeType":"text","value":"stock market","marks":[],"data":{}}]},{"nodeType":"text","value":" returns, they found a negative relationship. So, how do we square this and our common sense? 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Of the few historical examples since 1900, a number occurred in the build up to World War II or because of the reconstructions afterwards. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"More usually, a three-year period of strong growth is followed by a few years of more moderate progress. Even the most successful economic stories have setbacks along the way. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"We see a similar pattern when looking at economic forecasts. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Citi US Economic Surprise index measures the extent which economic data releases exceed or fall short of economists' expectations. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"A period of economic data coming in better than expectations is typically followed by a period of disappointing releases. Over the last 20 years, expectations for US economic activity were exceeded in 131 months and fell short in 110 months. Knowing this, the run of 15 months of positive surprises we’re having right now is unique.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Remember though, past performance isn’t a guide to the future. 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The MSCI World Small Cap index has over 4,000. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"What’s more, individual company results explain more of the stock performance. For larger companies, country, sector, and style factors are more relevant for investor outcomes. 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Successful businesses might be subject to a ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/takeovers"},"content":[{"nodeType":"text","value":"takeover","marks":[],"data":{}}]},{"nodeType":"text","value":" or promoted to the large-cap world. Less successful large companies will be demoted. And the least successful companies will fail.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Over the last decade, the companies exiting the small cap world have been higher quality than the new entrants – one ingredient in their underperformance. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What risks are the same whether you’re investing in big or small companies?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Investors in smaller companies are still exposed to the ups and downs of ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/stock-market"},"content":[{"nodeType":"text","value":"stock markets","marks":[],"data":{}}]},{"nodeType":"text","value":". They need to understand their country and industry exposures. They’re still exposed to style factors like quality and value. And they need to be aware of stock-specific risks. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"While a smaller companies index is riskier than a large companies index, an actively managed portfolio doesn’t have to be. Investors can manage risk by tilting exposures to these different risks.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"These range of risks help explain why smaller companies perform differently to large. Investors have to decide whether they’re being adequately rewarded for these risks – or manage them through stock selection.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1wErdyuBHCDfTeZcKelr3o","type":"Entry","createdAt":"2024-05-02T12:56:34.940Z","updatedAt":"2024-05-02T12:56:34.940Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":9,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockInfoBox"}},"locale":"en-US"},"fields":{"title":"Looking to invest in smaller companies?","infoSummary":{"data":{},"content":[{"data":{},"content":[{"data":{},"marks":[],"value":"If you’re looking to invest in smaller companies, an ","nodeType":"text"},{"data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=Active%20Investing,with%20passive%20investing."},"content":[{"data":{},"marks":[],"value":"active fund","nodeType":"text"}],"nodeType":"hyperlink"},{"data":{},"marks":[],"value":" could be an option – that way you leave the stock picking to an expert fund manager who’ll manage the risks we’ve spoken about above.","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"Our Wealth Shortlist is a good place to start. ","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"We put funds under the microscope to make sure the list only contains the funds that our in-depth analysis indicates have the greatest long-term performance potential. ","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"From global smaller companies to UK smaller companies, we have lots of different funds on our shortlist.","nodeType":"text"}],"nodeType":"paragraph"}],"nodeType":"document"},"ctAs":[],"position":"Inline","style":"fill"}}],"authors":["$10:props:data:authorArticles:0:fields:authors:0"],"newsLetterSignUp":"$10:props:data:authorArticles:0:fields:newsLetterSignUp","dropCap":"Standard","metadata":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7CWDA7tFyQsaHv4isvjObh","type":"Entry","createdAt":"2024-05-02T12:56:34.971Z","updatedAt":"2024-05-02T12:56:34.971Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":5,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"pageMetadata"}},"locale":"en-US"},"fields":{"seoTitleTag":"10 things you need to know when investing in smaller companies | HL","seoMetaDescription":"How are smaller companies different from investing in bigger companies – what you need to know.","seoIndexingRules":"index,follow","snippetSettings":true,"openGraphType":"website","twitterCardType":"summary_large_image"}},"showImageOnArticle":true,"featuredImage":{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7wvhWZzYovTBrHHmSwC6Wr","type":"Asset","createdAt":"2024-05-02T12:56:33.508Z","updatedAt":"2024-05-02T12:56:33.508Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":2,"revision":1,"locale":"en-US"},"fields":{"title":"A street of small shops.jpg","file":{"url":"//images.hl.uk/vvl3z0p6qtad/7wvhWZzYovTBrHHmSwC6Wr/b6726ca0688b5b918f93e3ace2814b36/A_street_of_small_shops.jpg","details":{"size":293597,"image":{"width":1260,"height":839}},"fileName":"A street of small shops.jpg","contentType":"image/jpeg"}}}}},"$10:props:data:authorArticles:22:fields:blocks:7:fields:article","$10:props:data:authorArticles:21:fields:blocks:7:fields:article",{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"2Pvo3blaRSkaK1b3wrULHf","type":"Entry","createdAt":"2024-02-29T14:26:00.425Z","updatedAt":"2024-02-29T14:26:00.425Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":46,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"article"}},"locale":"en-US"},"fields":{"theme":"Clifton Navy","titleAndPath":"Why is Europe ‘cheap’ and where’s the opportunity? – 3 fund ideas [@ why-is-europe-cheap-and-wheres-the-opportunity-3-fund-ideas]","articleType":"$10:props:data:authorArticles:0:fields:articleType","intro":"Europe is looking attractively valued right now but where are the opportunities? We look at the economic outlook, stock markets, and share 3 fund ideas.","publishedDate":"2024-02-29","categories":["$10:props:data:authorArticles:0:fields:categories:0:fields:parentCategory","$10:props:data:authorArticles:21:fields:blocks:7:fields:article:fields:categories:0"],"featureArticle":false,"blocks":[{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"7A5GEQfa4ZS6nzt969eihN","type":"Entry","createdAt":"2024-02-29T14:26:00.613Z","updatedAt":"2024-02-29T14:26:00.613Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":17,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContent"}},"locale":"en-US"},"fields":{"content":{"nodeType":"document","data":{},"content":[{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Even with a tight labour market putting pressure on ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/inflation"},"content":[{"nodeType":"text","value":"inflation","marks":[],"data":{}}]},{"nodeType":"text","value":" in 2023, it still fell in the euro area from 10.6% to 2.8%. Most longer-term expectations are now placing inflation around the target level of 2%. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The unemployment rate in November was 6.4%, the lowest it’s been since the start of the euro. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Earnings grew in recent months, which could help inflation stay higher. But not all companies are passing on rising costs to customers, which might instead keep it at bay. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This is a mixed blessing for investors – good news on inflation, but not so good for corporate margins. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Economic growth in Europe has also stagnated. Recent data is suggesting continued weakness in the near term and, while we’re expecting long-term growth to pick up eventually, demographics could mean growth is more subdued. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The population is close to its peak and expected to shrink later this century. And the working-age population is set to fall at the same time as the number of over-65s grows. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The bright spot for global growth is the productivity potential of artificial intelligence, but the scale and timing of this benefit are still big unknowns.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"High levels of government debt are also still a concern. This creates a longer-term vulnerability – but aren’t an immediate threat. ","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"What does this mean for investors?","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This might sound gloomy for investors, however, the good news is that growth forecasts have been revised down. And that creates scope for positive surprises. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The European ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/stock-market"},"content":[{"nodeType":"text","value":"stock market","marks":[],"data":{}}]},{"nodeType":"text","value":" is looking like good value right now. It’s below the global average, and at a historical low compared to the expensive US stock market. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This improves investors’ chances of finding a ‘bargain’ and could limit potential downside. But what about growth prospects? ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Well, earnings are expected to grow modestly in 2024, while profit margins are at a 20-year high.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The Europe ex-UK market is well diversified by country and sector. France, Switzerland, Germany and the Netherlands are the biggest constituents. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The largest sector – financials – is only 17% of the index. And there are six industries represented in the 10 biggest companies. By contrast, seven tech-related stocks (‘the magnificent seven’) have dominated US market performance recently and now make up over a quarter of the market. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Europe is home to semiconductor equipment manufacture ASML, luxury goods producer LVMH, and food giant Nestle – some of the biggest companies in the world. But some industries are local to the 27 countries that make up the EU. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The US stock market has raced ahead of Europe over the last decade. Its economy, with its expanding population and dominant tech sector, will likely keep outpacing growth in Europe – but of course that’s not guaranteed. For now, though, valuations favour European shares.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"This article isn’t personal advice. All investments, and any income from them, can fall as well as rise in value, so you could get back less than you invest. Past performance isn’t a guide to the future. If you're not sure if an investment is right for you, ask for ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/financial-advice"},"content":[{"nodeType":"text","value":"financial advice","marks":[],"data":{}}]},{"nodeType":"text","value":".","marks":[],"data":{}}]},{"nodeType":"heading-2","data":{},"content":[{"nodeType":"text","value":"Where’s the opportunity? – 3 European fund ideas","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Investing in ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary/funds"},"content":[{"nodeType":"text","value":"funds","marks":[],"data":{}}]},{"nodeType":"text","value":" isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a long-term ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/diversification"},"content":[{"nodeType":"text","value":"diversified","marks":[],"data":{}}]},{"nodeType":"text","value":" portfolio.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"For more details on each fund and its risks, please see the links to their factsheets and key investor information below.","marks":[],"data":{}}]}]}}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"1GbqYjM8AIR1kaR4MYOPLH","type":"Entry","createdAt":"2024-02-29T14:26:00.675Z","updatedAt":"2024-02-29T14:29:50.378Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":24,"revision":2,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContentWithCompanyInformation"}},"locale":"en-US"},"fields":{"sedol":"BWX5D39","investmentType":"fund","content":{"nodeType":"document","data":{},"content":[{"nodeType":"heading-3","data":{},"content":[{"nodeType":"text","value":"Polar Capital European ex UK Income","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/p/polar-capital-european-ex-uk-income-i-gbp-accumulation"},"content":[{"nodeType":"text","value":"Polar Capital European ex UK Income","marks":[],"data":{}}]},{"nodeType":"text","value":" is different to many in the European sector because it’s offering an income and a more conservative investment approach. ","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"It aims to deliver income greater than the MSCI Europe ex-UK index and grow investors' money over the long term, but with less ","marks":[],"data":{}},{"nodeType":"hyperlink","data":{"uri":"https://www.hl.co.uk/learn/glossary#:~:text=Volatility,than%20you%20invested."},"content":[{"nodeType":"text","value":"volatility","marks":[],"data":{}}]},{"nodeType":"text","value":" along the way.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The manager invests in bigger European companies they think are undervalued. These are companies going through a tough time or where the manager doesn’t feel the share price matches the longer-term potential and could bounce back. This is different from other European funds that focus on companies with high-growth expectations. As a concentrated fund, each investment could have a big impact on performance, which increases risk. The managers also have the flexibility to use derivatives which can magnify any gains or losses and increases risk.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"Nick Davis, the fund’s lead manager, currently focuses on sectors like insurance, telecoms, and healthcare. These are defensive areas that pay an attractive income – the idea is that these companies tend to do well regardless of how the economy is doing.","marks":[],"data":{}}]},{"nodeType":"paragraph","data":{},"content":[{"nodeType":"text","value":"The fund has a historical yield of 3.96%. Although remember, income isn’t guaranteed, and yields are variable and not a reliable indicator of future income. The fund takes charges from capital which can increase the yield but reduce potential for capital growth.","marks":[],"data":{}}]}]},"emailSignUp":"false","heading":"Polar Capital European ex UK Income"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"4YJJWPc5UW8dvxZHbdQsR6","type":"Entry","createdAt":"2024-02-29T14:26:00.696Z","updatedAt":"2024-02-29T14:26:00.696Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":19,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContentWithCompanyInformation"}},"locale":"en-US"},"fields":{"sedol":"B8BC5H2","investmentType":"fund","content":{"data":{},"content":[{"data":{},"content":[{"data":{},"marks":[],"value":"CT European Select","nodeType":"text"}],"nodeType":"heading-3"},{"data":{},"content":[{"data":{},"marks":[],"value":"This fund focuses on growth instead of income. Benjamin Moore and David Dudding, the fund’s managers, look for high-quality, established European companies they think offer long-term sustainable returns. ","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"This means the companies in ","nodeType":"text"},{"data":{"uri":"https://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/c/ct-european-select-class-z-accumulation"},"content":[{"data":{},"marks":[],"value":"CT European Select","nodeType":"text"}],"nodeType":"hyperlink"},{"data":{},"marks":[],"value":" might not be as lowly valued as those in other funds, but they should still have strong growth potential over the long run.","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"The managers prefer companies operating in industries with relatively few competitors and with strong pricing power – the ability to pass on rising costs to consumers without denting demand too much. A competitive advantage that others struggle to replicate is another trait they like.","nodeType":"text"}],"nodeType":"paragraph"},{"data":{},"content":[{"data":{},"marks":[],"value":"They currently focus on sectors like industrials, consumer discretionary and information technology, because of the promising opportunities they find. They avoid companies they believe don’t have as much pricing power, like real estate, energy, and utilities. They invest in a relatively concentrated number of companies, meaning each investment could have a big impact on performance, which increases risk.","nodeType":"text"}],"nodeType":"paragraph"}],"nodeType":"document"},"emailSignUp":"false","heading":"CT European Select"}},{"metadata":{"tags":[],"concepts":[]},"sys":{"space":{"sys":{"type":"Link","linkType":"Space","id":"vvl3z0p6qtad"}},"id":"MZpTfEyevJzei8SD2r774","type":"Entry","createdAt":"2024-02-29T14:26:00.716Z","updatedAt":"2024-02-29T14:26:00.716Z","environment":{"sys":{"id":"master","type":"Link","linkType":"Environment"}},"publishedVersion":17,"revision":1,"contentType":{"sys":{"type":"Link","linkType":"ContentType","id":"blockContentWithCompanyInformation"}},"locale":"en-US"},"fields":{"sedol":"BG0QP04","investmentType":"fund","content":{"data":{},"content":[{"data":{},"content":[{"data":{},"marks":[],"value":"Legal & General European Index","nodeType":"text"}],"nodeType":"heading-3"},{"data":{},"content":[{"data":{},"marks":[],"value":"This fund is a low-cost option for tracking the performance of the broader European stock market, measured by the FTSE World Europe ex UK Index. 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