What if the classic 60/40 diversification no longer works? Government bonds increasingly move in the same direction as equities during risk-off episodes. What are attractive alternatives to government bonds? In the May special, we discussed commodities and private debt; in this report, we examine whether gold or Bitcoin is an attractive alternative.

The markets are anticipating several interest rate hikes by the ECB and the Bank of England, and this has put significant upward pressure on two- and five-year IRS rates. However, we no longer expect much further rise, and we believe short-term rates are more likely to fall than rise in the coming months…

The markets are looking past the oil crisis, but we believe investors are placing too much faith in a swift return to normality in the Middle East. As long as profit forecasts continue to rise, the bull market may continue, but risks are piling up: physical oil shortages, private debt stress, AI concentration and high valuations, among others. Are investors in for a nasty surprise?