Equities enjoyed another excellent week as the S&P 500 rose for seven days in a row – the longest streak since July. Markets have been buoyed by a strong earnings season, with concerns over inflation, supply chains blockages, and political wrangling in Washington failing to hog the limelight. However, for those of the Multi-Asset persuasion, it is worth keeping a close eye on the bond market which takes a much more sombre view of potential interest rate developments.


We do maintain a cautious outlook for sovereign bonds. Whilst we do not adhere to the ‘bond bubble’ thesis, we do believe that the direction of interest rates in the Eurozone will be higher, which will lead to higher bond yields and lower bond prices. Our current bond positioning is of lower duration, which reduces the funds sensitivity to changes in interest rate expectations. We also hold the lowest level of sovereign bonds in our Prisma Funds since their inception. Whilst our positive equity position has certainly delivered so far this year (and for several years) it is worth nothing that superior asset allocation also has a keen focus on mitigating downside risks across all asset classes.  


Finally, although not explicitly named by US regulators, it was confirmed over the weekend that a whistleblower who helped authorities into their investigations of Deutsche Bank’s manipulation of interest rate benchmarks has received a record pay out. Under the US system, whistleblowers (or ‘relators’ as they are more politely referred to in legal parlance) are rewarded with a share of the fines levied by authorities. The system has led to the Commodity Futures Trading Commission approving a payment just shy of $200 million to one individual.