“We believe inflation is likely to increase at the end of the year as the effects of the oil price fall on the data wear off. We believe that US and UK interest rates will start to rise later this year or early next. The path of both will be very slow and likely to peak at just more than 2%.
In a rising-rate environment we feel growth stocks will perform better than high-yielding shares that have been bid up by yield-hunters. Many investors who would be more comfortable, in a ‘normal’ world, holding bonds have been pushed into ‘bond proxies’, which we think will be hit as monetary policy tightens.
We remain ‘bullish’ on Japan, which outperformed all other major developed markets last month. It posted 5.1% in yen terms during May and we think the country’s corporate reinvigoration is only just beginning. Volatility across the globe is creating opportunities.”
David Coombs, Head of Multi-Manager Investments, Rathbones