All Seasons Global Multi-Asset

The backdrop has turned since March. Israel and the US opened military operations against Iran in late February, and the contest over the Strait of Hormuz sent Brent well above $100 before it settled back into the low $80s. That single shock has reset the policy path almost everywhere: US inflation reaccelerated rather than cooled, and the Federal Reserve has now held at 3.50 to 3.75% for five straight meetings, with three members dissenting in favour of a hike and markets pricing tightening rather than cuts into year end. The European Central Bank reversed its own easing cycle and hiked in June, its first increase since 2023, on an energy-driven inflation shock. The Bank of Japan kept tightening as planned, taking its rate to 1%, though the yen has weakened to a 40-year low regardless. The Reserve Bank of India has held steady through the year rather than easing. The dollar has strengthened rather than softened, rebounding off a multi-year low.

The US still looks expensive, so we hold the largest underweight the mandate allows. Japan is the one call we are reversing: despite the Bank of Japan's tightening, the Nikkei has been the best-performing major market this year on exporter earnings and the AI capex trade, so we have moved the position back to neutral rather than staying underweight into strength. India remains the cheapest major market we follow, and the valuation gap has widened further, but foreign investors have kept pulling out through the first half of the year and the rupee has weakened past 95 to the dollar. We are holding the position as a valuation call with that flow risk explicitly noted, not as a Reserve Bank easing call. China is the next cheapest large market and keeps a similar overweight. Gold has corrected 26 to 28% from January's $5,595 record to around $4,000 to $4,100 an ounce as real yields rose, and we have now trimmed it to 10%, cutting the long-term weight itself from 10% to 8% in the process. The structural case, central bank buying and record global debt, is intact, so we still carry two points above that baseline, but we no longer see the case for the large overweight we ran through the advance while real yields stay elevated. We have moved the inflation-hedging role of the portfolio onto inflation-linked bonds instead, doubling their strategic weight to 4%, which benefit directly from an energy-driven inflation shock without gold's sensitivity to the rate path.

Overall we still run slightly less equity, 50% against a long-term 55%, while lifting bonds to 28% against a long-term 25% and holding alternatives at 21% against a long-term 19%. Within bonds we have raised core US exposure back to neutral, since yields near 4.7% on the ten-year now pay you to hold duration rather than acting purely as ballast, and inflation-linked bonds have become our preferred inflation hedge over gold, whose case weakens as real yields rise. We have also shifted our emerging market debt preference toward hard-currency bonds over local-currency, since the weaker-dollar case behind the local-currency overweight did not hold up. We stay light on high yield, where spreads are tight and offer little cushion against a geopolitical or inflation surprise. The portfolio still targets around 10% annual volatility, though we would flag that an inflation-shock regime is one where stocks and bonds can fall together rather than offsetting each other, so realised risk may run above target if that correlation stays elevated.