After many false starts it’s looking likely that the military conflict between Iran and the US is paused, at least for the time being, and the strait is set to reopen.
What is the impact on markets likely to be, and what do you expect the long-term outcome of the war to be?
A pause in hostilities and the reopening of the Strait should ease near-term tensions, likely bringing some relief to energy prices and overall global risks. However, this is unlikely to mark a lasting resolution. The conflict has effectively been ongoing since 1979, and the US has not achieved its original objectives. Regime change in Iran still appears a distant prospect, suggesting this is more of a pause than an end.
Markets and populations tend to move on from geopolitical events unless the impacts directly affect them and become persistent. While the energy disruption has been meaningful, the global economy – particularly developed markets – has proven resilient. Although as seen during COVID, the greater strain has fallen on poorer countries.
Longer term, the implications are more structural. Iran’s current regime may strengthen from here on, while repeated disruption accelerates efforts to bypass the Strait of Hormuz. These adaptations will be costly and inflationary.
Overall, this reinforces a shift toward energy and security sovereignty, supply chain resilience, and a more fragmented global system – supporting a higher inflation, higher rate environment over time.
With the next Bank of England announcement on Thursday and following the ECB hike last week, where do you see interest rates both domestically and future afield in the future?
There remains a wide range of unknowns when it comes to the interest rate outlook, making it difficult to form strong conviction on the path ahead. What does appear more likely is that interest rates stay structurally higher, driven by inflation that proves stickier than many expect. Central banks have consistently underestimated inflation over the past five years, and there is growing scepticism around their ability to bring it back to previous targets without changing the framework itself.
At the same time, there is limited visibility on the future direction of policy, particularly in the US. While recent commentary has been more hawkish, the views of the wider Federal Reserve – and potential leadership changes – remain unclear. Markets have historically struggled to accurately predict these shifts.
With inflation elevated, interest rates logically need to remain higher unless policymakers choose to ignore underlying economic pressures. That introduces the risk of a policy misstep, where markets react sharply to perceived complacency – something investors should remain mindful of in portfolio positioning.
What exactly is driving markets with valuations so high yet sentiment low?
There is a clear disconnect between strong market performance and weaker sentiment, and much of this comes down to who is actually participating in markets. Sentiment surveys often capture a broad population, many of whom have little direct exposure to equities. This reflects the increasingly K-shaped nature of the US economy.
For those with invested assets, rising markets have boosted wealth and supported spending power. These individuals benefit from compounding returns and remain active in the economy, helping to sustain growth. In contrast, those starting with higher debt and facing persistent inflation and borrowing costs are seeing their real incomes squeezed, which weighs heavily on overall sentiment.
From a market perspective, this concentration of wealth matters. Stronger cohorts continue to spend and reinvest, supporting corporate earnings and tax revenues. However, it also creates fragility – if this group pulls back, the impact on growth, government finances, and markets could be significant.
Ultimately, elevated valuations can coexist with weaker sentiment, but the balance remains delicate and dependent on continued spending from a relatively narrow base.
With gold off its previous peak, do you remain optimistic or are there other commodity themes that are of interest?
The recent pullback in gold, and particularly in gold miners after a strong run, looks more like a period of consolidation than a change in the broader thesis. The underlying drivers – concerns around fiat currencies, ongoing central bank buying, and portfolio diversification – remain firmly in place. In fact, continued purchases by central banks, including China, highlight that institutional demand is still supportive, even as late retail flows have experienced volatility.
It is important, however, to view gold within a broader commodities context and be mindful of shifting correlations, which can change over time. The case for commodities more generally remains compelling. Years – if not decades – of underinvestment across energy, resources, and supply chains are now colliding with a world that is increasingly focused on security and self-sufficiency.
As countries look to stockpile and secure key inputs, supply is effectively taken off the open market, creating upward pressure on prices.
In that environment, we remain constructive on both gold and the wider commodities complex, albeit for different but complementary reasons.
From FAANG to MANGOs, what are your views on the recent SpaceX IPO and upcoming other mega IPOs?
High-profile IPOs such as SpaceX attract significant attention, but valuing them remains highly uncertain, with a very wide range of potential outcomes. Their sheer size means they can quickly become market-moving, yet there is often limited clarity on how to anchor those valuations.
We have seen this before with companies like Tesla, where the share price has often moved independently of traditional fundamentals, with investors debating what the business actually represents. In many cases, valuations are shaped as much by expectations and narrative as by underlying cash flows.
That same challenge applies to newer names. While companies like SpaceX may prove transformational over time, much of the valuation can be driven by optimism around future potential rather than current visibility.
From a portfolio perspective, discipline remains key. For clients invested in our portfolios, our preference is to gain exposure only where underlying active managers see a clear and justifiable investment case. We focus on manager outcomes rather than second-guessing individual calls, particularly in areas where uncertainty is highest.
Many active managers thought AI had peaked a year ago. Is this another argument for passive investing?
It’s fair to say some of the early AI enthusiasm peaked, but the story is still evolving rather than finished. A key moment was when new entrants like DeepSeek in January 2025 reshaped the narrative, challenging the idea that AI would be dominated by a small group of US companies. That has broadened both the opportunity set and the uncertainty.
From a passive versus active perspective, the argument cuts both ways. Passive indices can provide concentrated exposure to the dominant winners, which has clearly benefitted from the AI theme so far. However, that also creates reliance on a relatively small number of stocks driving returns.
Active managers, by contrast, are typically constrained in how much they can allocate to any one position. While this can limit upside in the strongest performers, it also helps manage concentration risk and avoids overexposure to areas driven heavily by sentiment.
Ultimately, AI reinforces the need for balance. Passive captures the winners efficiently, but active management can provide discipline and risk control in a fast-moving and uncertain space.
MPS has become the go to service for many IFAs, how does IBOSS differ from other MPS providers? What are your USPs?
MPS is rightly at the forefront of the IFA market, but where providers differ is in how consistently they deliver both outcomes and service.
For IBOSS, a key strength is accessibility. Advisers have direct access to our teams across operations, investments and more, supporting a high-quality service that prioritises client outcomes and strong, lasting relationships. This approach has been consistently recognised, with IBOSS the only MPS provider to win the FT Adviser 5-star service award six years consecutively.
From an investment perspective, our portfolios are built with a high level of diversification relative to peers. This has helped deliver strong long-term performance while also improving resilience during periods of market stress. We also focus on risk-adjusted returns – ensuring clients are being appropriately rewarded for the level of risk they are taking.
Ultimately, this combination enables advisers to deliver more consistent outcomes and keep clients on track to achieve their financial goals.
How are you adopting AI into process? Are you using it in fund decisions? How much influence do you expect it to have going forward?
AI is becoming an important tool within the investment process, but not a decision-maker. Over the long term, we do not expect AI to replace human judgement when it comes to fund selection or portfolio construction.
What we are seeing more broadly is that AI is being used to improve efficiency. Across the industry, the most effective use cases are in data-heavy and time-consuming tasks, helping teams process information more quickly and freeing up time for higher-quality analysis and critical thinking.
There are still clear limitations. AI outputs can be inconsistent, and so-called “hallucinations” remain a concern. When responses need to be checked and verified, it reduces the reliability of these tools in supporting high-conviction investment decisions.
As a result, we see AI as an enabler rather than a driver. It can enhance the process, but the responsibility for decision-making – and accountability for outcomes – remains firmly with the investment team.
What Impact do you expect to see on the global economy due to China’s aging population and the fiscal strains that will pose? What regions are expected to benefit from that? Could India be a benefactor in the longer term?
China’s ageing population is a clear long-term headwind, creating fiscal strain and slowing domestic growth. We are already seeing signs of this in weaker domestic data, with the economy still heavily reliant on exports. For the rest of the world, that dependence can be supportive, as it encourages China to remain engaged and pragmatic in global trade.
However, the demographic challenge highlights the risks of policy intervention, such as the one-child policy, where long-term consequences are now feeding through. In that sense, other regions with stronger population growth stand to benefit.
India is often highlighted as a key beneficiary over the long term, supported by favourable demographics and an increasingly entrepreneurial economy. It has also shown a willingness to act in its own interests, which adds to its resilience.
That said, near-term challenges remain, including energy pressures and questions around its role in the AI-driven economy. While the long-term case is compelling, many managers remain selective, waiting for clearer catalysts before increasing exposure.
Are you optimistic about the rest of the year? Are there any specific areas you are positive on?
We remain broadly constructive for the rest of the year, but recognise the current conditions is more nuanced relative to history. Governments have shown a clear willingness to step in quickly during periods of stress – whether through financial system support or broader economic stimulus – which continues to underpin markets and help keep growth intact.
The challenge is that this is now happening alongside higher inflation and a “higher for longer” interest rate backdrop, which creates a more complex balancing act. Starting points also matter. Equities are at elevated levels, while bond yields – around 4 – 4.5% on US Treasuries – are now offering more attractive income than in recent years, improving the case for fixed income.
Opportunities within equities remain broad. Areas outside the US, sectors that have been out of favour, offer more attractive relative valuations. We also see value across asset classes, including infrastructure, property, and commodities.
While parts of the market look expensive, leadership can persist longer than expected. Ultimately, diversification remains key to navigating this environment and capturing opportunities as they emerge.
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