Sam Watkins

Markets can remain irrational for longer than you can remain solvent.

When you see interest rates move higher, it does put a gravitational pull on equity prices.

One thing that I've changed my mind on, goodness, I change my mind on everything all the time.

I'd be accused of that often.

Look, I'd say probably the one thing that hasn't changed has been what I talked about in terms of, that's true, but I guess the environment of uncertainty.

What has changed is that that environment of uncertainty now, I think, has, if anything, gotten a little more extreme than perhaps where it was in October when we spoke to each other last.

Because that period there, we were talking about how there was this dispersion of economic cycles around the world.

There was a rise in geopolitical risk.

But also what we were talking about at that stage was that we were seeing a tapering off of inflationary pressure.

That's changed.

And so that's probably the biggest change and what's driven, I think, of course, you know, a big shift in the interest rate environment.

I think one of the key things is that while inflation was beginning to taper when we last spoke in October last year, it never went away.

So there was still this consistent impulse of inflation that was being driven by supply side constraints and also being driven by what was a fairly persistent government spending that really never came down from that post-COVID high.

And that government spending has done a few things.

The first thing is, of course, that it has been a driver of persistent growth, a very strong growth impulse.

Second thing is that it's increased the supply of bonds around the world.

And the increase in the supply of bonds puts pressure on bond prices and increases the expectation that people have for the premium that they should receive for buying longer-dated bonds.

And at the same time, one of the biggest changes, of course, is that in March we saw the Iran war begin and the Iran war is still, of course, unresolved.

I sort of feel like depending on which morning you wake up, we're about to see it resolved and then we're about to restart again.

But regardless, where we are at the moment is in a very messy stalemate, and that's creating a lot of uncertainty in energy markets.