This is commentary, not advice, and not a recommendation to buy or sell anything. It describes how we read the environment; it cannot know your circumstances. The value of investments can fall as well as rise.
Take it with you
The full report is below. Save it as a PDF to read later or circulate internally — the page and the file are the same document.
Market Forecast & Trends
Saves the full report without the site navigation, using your browser’s print-to-PDF.
Interest rates and policy
Policy rates set the floor under everything else: what you earn on savings, what you pay on a mortgage, and how companies are valued. Most of the noise in markets is an argument about where they go next.
- What central banks respond to
- Inflation against target, the labour market, and financial stability. When those three disagree, policy gets unpredictable.
- Why the curve matters
- The gap between short and long rates prices the market’s view of growth and inflation years out. An inverted curve has historically preceded slowdowns, though not on a reliable schedule.
- The lag
- Rate changes take many months to reach the real economy. The effect you feel today is usually last year’s decision.
What this means for a borrower
If a rise of two percentage points would make your payment uncomfortable, fix the rate. That decision does not require a forecast, which is exactly why it is the reliable one.
Currencies
- Rate differentials between economies dominate currency moves over months; trade and capital flows dominate over years.
- A stronger home currency makes imports and foreign travel cheaper and exporters’ earnings worth less.
- For a business collecting in one currency and paying in another, the exposure is a real cost, not a market opinion.
- Hedging removes uncertainty; it does not guarantee a better outcome. That trade-off is the whole decision.
Credit and fixed income
| Segment | What drives it | Main risk |
|---|---|---|
| Government bonds | Policy rates and inflation expectations. | Duration: prices fall when yields rise. |
| Investment-grade credit | Rates plus the spread over government debt. | Spread widening in a downturn. |
| High-yield credit | Spreads and default expectations. | Defaults, and liquidity drying up exactly when you need it. |
| Short-dated cash instruments | The policy rate almost directly. | Reinvestment risk if rates fall. |
Yield is compensation for risk
When one instrument pays noticeably more than a comparable one, the difference is not a free lunch — it is the market pricing something you have not identified yet.
Equities
Share prices are earnings multiplied by what people will pay for those earnings. Both halves move, and the second moves faster.
- Rising rates compress valuations, because future earnings are discounted more heavily.
- Concentration risk has grown in most major indices; a handful of companies can dominate an entire market’s return.
- Diversification across regions and sectors remains the only defence that is free.
- Time in the market has historically mattered more than timing it, and the evidence on that is not close.
What we watch
- 1Inflation prints against target, and whether the core measure is moving with the headline.
- 2Labour market data, which usually turns before the wider economy does.
- 3The shape of the yield curve, rather than the level of any single point on it.
- 4Credit spreads, which widen before equity markets acknowledge a problem.
- 5Currency moves large enough to change corporate earnings.
Forecasts age badly
We publish what we watch and how we read it rather than a number for next December, because the second is entertainment and the first is useful.
Applying it
Documents you may also need
Insights Archive
Everything we publish, in one place: research, guides, masterclasses and the help centre — with an honest note on what an archive is and is not.
GuidesAlternative Assets: Beyond Equities
Private equity, venture, property, infrastructure and private credit — what each actually is, what you give up to hold it, and who they suit.
GuidesThe ESG Integration Playbook
What sustainable investing does, what it does not, how the labels differ, and how to check whether a fund does what its name suggests.
This document was last updated on 1 August 2026. We publish the current version here at all times; superseded versions are available on request.
If anything on this page is unclear, write to us and we will explain it.