There is a great deal going on in the markets at the moment. Oil has moved higher on the back of developments in the Middle East, the Bank of England has held rates rather than cutting, unemployment has risen to 5.2 %, and the equity market wobbled in March without fully settling. All of that gives clients plenty to ask about. Set out below, in plain English, is where the committee has currently landed, across the parts of the market that matter for portfolios.

Protection

Gilts: The market appears to be pricing-in the possibility that the Bank may hike again. That is not our central view. With growth this weak and unemployment ticking up, it is difficult to see the Bank adding further rate rises solely because inflation remains elevated. On that basis, nominal gilts at the short and medium end look relatively attractive in our view. The long end of the curve remains less convincing, so our preference is to stay shorter.

Index-linked gilts: The position is different here. They have had a strong run, implied inflation has moved up, and the cost of inflation protection now looks less compelling. On that basis, we currently prefer nominals.

Income

Investment grade credit: Companies are still earning well, but they are spending more on servicing debt and carrying more of it. Spreads widened slightly in Q1 but remain tight by historical standards, which means a modest move could leave short-term holders facing losses. With sovereign yields where they are, however, the all-in income still looks reasonable for investors holding over the medium term.

Emerging market local currency: This remains a difficult area. Inflows have turned positive for the first time since 2021, which

Greg Ralley Investment Services Business Development Manager, Omni Invest

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