This week on The Art of Investing, Rich McDonald, Mark “Spice” Holden and Chris “CJ” Fellingham are joined by Stu Thompson, Economic Strategist, to break down a market being driven less by fundamentals, and more by shifting interest rate expectations.

With central banks holding steady but markets rapidly repricing from rate cuts to potential hikes, the team explore whether interest rate expectations have become disconnected from reality.

They also dive into continued stress in private credit, the impact of oil and geopolitics on inflation, and why bond markets are no longer providing the diversification investors expect.

The big question: are markets overreacting, and where are the opportunities if they are?

This Week’s Highlights:

🏦 Rate Expectations Flip

Markets move from pricing cuts to multiple hikes, a huge shift in sentiment.

📉 Bonds Fail to Diversify

Gilts and treasuries fall alongside equities, challenging traditional portfolio theory.

⚠️ Private Credit Stress Builds

Redemption limits and liquidity concerns continue to emerge.

⛽ Oil & Inflation Risk

Energy prices remain the key driver of inflation expectations.

📊 Markets Still Resilient

Despite volatility, equities hold up better than many expected.

🧠 Don’t Fight the Noise

Why long-term investors should avoid reacting to short-term headlines.

Portfolio Snapshot - Week 32:

Weekly performance: –1.7%

Total return since inception: +12.5%

Top Performers

🥇 iShares Russell 2000 ETF: +1.1%

🥈 Cash: +0.1%

🥉 iShares UK Gilts 0–5yr ETF: –0.4%

Underperformers

📉 WisdomTree Copper ETF: –5.4%

📉 VanEck Crypto & Blockchain Innovators ETF: –3.7%

📉 iShares MSCI India ETF: –2.9%

Portfolio Positioning:

The portfolio remains diversified across:

• Commodities and real assets

• Global equities (US, UK, Europe, EM)

• Small and mid-cap exposure

• Bonds and cash as stabilisers

However, this week highlights a key theme: diversification doesn’t always protect during inflation-driven shocks.

Big Questions This Week:

• Have interest rate expectations become unrealistic?

• Are central banks likely to follow market pricing?

• Is private credit the next major risk area?

• Can equities continue to hold up if rates stay higher?

What You’ll Learn:

✔️ How markets price interest rates (and why it matters)

✔️ Why bonds don’t always offset equity risk

✔️ What’s really driving current market moves

✔️ How to stay disciplined during volatile periods

📈 Download the full Portfolio Performance Slides

View the portfolio breakdown: here

📧 Get in touch: theartofinvesting@ig.com

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Disclaimer:

This podcast is provided for educational and informational purposes only. The content presented is not intended as personal investment advice or a recommendation to buy, sell, or hold any particular securities or investments. All discussions regarding the model portfolio are illustrative and for educational purposes.

Your capital is at risk. The value of shares, ETFs and ETCs can fall as well as rise, which could mean getting back less than you originally put in.

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Rate Hikes Back on the Table. Does This Spell Recession?

The Art of Investing