Tracy Coghill

Thank you for joining us. Ross McKnight is here, a senior member of our research team, to talk about a turbulent start to 2026. Ross, here we are, it's the 28th of May. Markets have had a roller coaster ride, but I noticed that our portfolios have held up very well and have been resilient. What are your thoughts at this point?

Ross McKnight

Yeah, thanks, Tracy. Yeah, it's been quite a tumultuous year. We came into January and February and markets were flying; there was lots of exuberance about AI. At the time we were expecting interest rate cuts from central banks. We were also conscious of the high levels of government spending in the UK. So we came into the year with a positive mindset and a good set up for markets but aware of the possibility that events could evolve quickly.

Tracy Coghill

And then President Trump became rather active?

Ross McKnight

Yes, obviously President Trump decided to change the narrative with the invasion of Iran. So, on the back of that, we did have a bit of a market sell off in the short term. The reason for this was market participants were expecting lower growth, higher inflation. And indeed, we had a big commodity price spike, particularly with the oil price, which is obviously a negative for growth. However, markets generally have seemed to look through this. And the reason for that is just the amount of exuberance there is in AI and the amount of spending in the AI theme. Whilst economies might be slightly weaker on the back of the ongoing war, the health of corporates has never been better. Indeed, some of the sums of money being spent are incredible. And this is really supporting companies' performance.

Tracy Coghill

Tell me, how has this translated into portfolios for our clients here at CAM? I know there were some brief dips back in April. What's the journey felt like to many of our clients?

Ross McKnight

Portfolios have generally experienced positive returns since the start of 2025 and we believe this will continue through 2026. Clients did feel some pain in April in the immediate aftermath of the invasion but our multi asset approach has served us well. Our clients’ portfolios have been much less volatile than many other investments and recovered quickly after the war began.

Tracy Coghill

And looking at our peers, how would you compare our recent client journey?

Ross McKnight

We are performing strongly against a wide cross section of our peers and, as I’ve said, the outlook is positive.

Tracy Coghill

Feels like diversification has been key?

Ross McKnight

Definitely, yeah. In December, while we weren't in any way predicting a war, our view of the world was that we're probably quite likely to get some inflation shocks on a medium-term view. So, we added some real assets to our alternatives within portfolios. This has been a really helpful source of diversification. When markets and equity markets sold off, this real asset fund held up particularly well. The other thing we did throughout the course of last year is adding to our position in inflation linked bonds; again, in that scenario where inflation comes in a bit higher than expected, these assets provide good diversification.

Tracy Coghill

So, I need to put you on the spot here. Will we see another inflation shock like we had in 2022? I’ll ask you to focus this on the UK to be most relevant to our clients.

Ross McKnight

Some tough questions here, Tracy. But I think the answer to this one is no, we won’t see an inflation shock comparable to 2022 as the circumstances are different. Coming out of COVID there was a lot of pent-up demand. Folks had sat at home, saving and not going out and suddenly economies opened up and people went out for dinner, bought new clothes, took holidays. The other factor is that the demand side of this question presents a very different set of circumstances. So, I think I can say safely, that we may have some negative news on inflation but we’re not facing another 2022 scenario here in the UK.

Tracy Coghill

That's helpful and I think a lot of us will be reassured. However, there's political instability in the UK, specifically with developments relating to the Council election results and the forthcoming by-election. I know we don’t want to comment on politics but what's our investment response to that? How are we looking at portfolios and the investments that you're holding in light of what might even lead to a new Prime Minister or even a change of government?

Ross McKnight

It’s a good question. I will answer that in two parts; there is a fixed income and an equity component to our approach. So, in terms of the fixed income side or the bonds investments that we own for clients, a lot of the political instability has been felt has impacted what we call the long end of the yield curve. So, we are positioned quite short, which means that we have not experienced the same price falls that some bond investments have in the UK.

Tracy Coghill

Can I stop you there? Let's put this in numbers. Are we saying that we've essentially invested in bonds with say a two year or three-year maturity as opposed to a 10 year or a 20 or 30 year term?

Ross McKnight

Yes, that’s right. We have avoided the big volatility of price falls in fixed income, which has been positive for us in relative terms. And to answer the equity element, the majority of our holdings in UK equities are in the FTSE 100 companies, the so called ‘large caps’. The performance of these companies is not driven by events in the UK so again our portfolios can remain resilient in time of UK political instability.

Tracy Coghill

Totally changing the subject, and continuing the theme of giving you some challenging questions today, we have had many recent questions about Artificial Intelligence. Put simply, are we experiencing an AI bubble?

Ross McKnight

Our view and that of the fund managers we work with is that AI is a revolution and it will change the world. However, there may be some weakness because of the circular nature of the businesses involved. Let me give you a quick example. Nvidia are widely publicised as the biggest chip maker. Nividia will sell their chips to Microsoft. Microsoft will build a data centre and rent space in that facility to companies like OpenAI. At the same time Nividia is investing its profits in firms such as OpenAI. If one element of the chain slows down, the outcome could be significant. That said, we see no signs of decelerating. If anything, companies are spending more and more on AI. Valuations are quite expensive but at least on a short to medium term view we think that there are still legs to go for AI.

Tracy Coghill

Can I ask what tech exposure we actually have? I know you have mentioned the possibility, albeit a remote one, of a sell off. How are client portfolios positioned if that does happen?

Ross McKnight

We have tech exposure in two ways. First, we have exposure to the US, where we're in some of the big businesses that people will be reading about. And we also have exposure to emerging markets. The way to think about emerging markets is as being essentially the supply chain or the manufacturing hub for the US tech investment. So, the benefit of being in emerging markets is you don't have to try and work out who the winner in AI is going to be because they're all spending money with you to build stuff. We do have a good exposure to tech but we’re probably slightly underweight tech versus some of our peers. This is because of the concern that you raised, Tracy, about a bubble. Most importantly, the way we run mandates is based on diversification. We are focused on good risk adjusted return above inflation, not chasing a particular sector.

Tracy Coghill

Crypto has also been a factor in client conversations recently. I know five or ten years ago this was quite a narrow topic but now it’s has become a bigger issue. Personally, my big concern is that some of the largest holders essentially own and run the exchanges that it is traded on. The conflict of issues there feel massive.

Ross McKnight

The issue is definitely the risk. I think I read that one in two coins launched goes to zero. We are trying to achieve long term above inflation growth and the payoff is risky. Similarly, all the assets that we invest in for our clients have some form of cash flow, profits, dividends or income payments so we can value those cash flows. That just doesn’t exist for crypto, so it is inherently difficult to know whether they are fairly valued or over-valued.

Tracy Coghill

Thank you for that explanation. Turning to another challenging question, what is our working theory of how the war in Iran will be resolved and the time scale that we are looking at? I’ve had a joking question asking you to name the end date, but in broader terms, how do we see it panning out? Will we get resolution in the shorter term or is there any real likelihood that this drags out and the issues including oil supply start to spiral?

Ross McKnight

Put simply, the world needs an end to this war. And that’s why we think that there will be a short to medium term resolution. There are a number of reasons to back up this proposition: President Trump has a midterm election coming up and his approval rating has never been lower. So, the American public aren't particularly happy with this war. Similarly, the Iranian economy is really struggling and despite the radical rhetoric, there is internal pressure to achieve a face-saving deal and regional pressure to bring an end to a war that is damaging so many economies. In a worst-case scenario where the war does drag on, this would not be great for our equity holdings. However, we have several levers that we could pull in portfolios with our fixed income allocation, with our alternatives allocation, and we could buy more value strategies, more defensive strategies within equity. So, there are a lot of levers that we could pull to protect our clients' capital if things did get bad.

Tracy Coghill

Finally, looking at more specific sectors, Core Fixed Income is continuing to perform strongly?

Ross McKnight

Exactly, yeah. So high quality issuers, high quality companies, governments were issuing attractive bonds with strong yields. And then we also had some interesting opportunities in our alternatives investments universe (as I touched on in the real assets piece earlier in 2026). So overall we're pretty optimistic. If things did get worse, as I mentioned, there are a number of levers we can pull.

We can buy more fixed income, we can go a bit more defensive and we're kind of ready to act if we need to. But I think we're quite a way away from that for the time being.

Tracy Coghill

Well, that's a really positive and upbeat way to leave it. Ross, thank you so much for your time and thank you to everyone who has joined us. We will be asking you for a further update over the next couple of weeks because we know that everything is changing quite quickly now. But we appreciate your time. Thank you.

Ross McKnight

Thank you