Sam Watkins

So they have a defensive characteristic.

The third thing that I'd say is that

Going back to the initial conversation that we were having around Warren Buffett's view on the apple and the gravity and the impact of higher interest rates being very similar on equities, I think it's very clear to most investors that you don't have to go as far out the risk curve to receive a reasonable return as you perhaps would have back when we were around zero rates in the 2021, 2022 period.

So you don't have to go out as far.

You don't have to take as much risk to achieve a reasonable return.

The key thing is starting level.

So back in 2022, starting rates were close to zero in most parts of the world.

And when you start at zero, it's very hard for bonds, of course, to appreciate in an environment where you see a sell-off in the share market.

And so

What we see today is a very, very different set of facts.

Firstly, as you rightly mentioned, we're at close to sort of 30-year highs in some markets in terms of rates.

And what has been priced is the impact of and the risk of higher inflation from energy.

What has not been priced in bond markets at present is a potential impact of these prices and the various headwinds to growth that could cause rates to be cut significantly.

in the future.

So starting point is important.

And what we would expect is if you do see a large sell-off in the share market, it's being driven by a change in the growth environment and those things we would expect to see flow through to the way central banks are approaching rates and therefore a good environment for bonds.

Your comment there around uncertainty is certainly one that I would latch onto.

And I think the thing that is uncertain is the time horizon over which whatever this scenario is plays out.

And what you could have is multiple versions of those different charts and

at different points in time.