We think the world economy is in fair shape. The data from the US are red hot, Europe has slowed but should muddle through, and China has a stimulus programme on the go, which will take effect over the next six months. Globally, consumers are confident and spending merrily. Inflation is roughly where central banks would like it to be but is drifting up, this could lead to interest rates rising faster than markets currently expect.

For investors who have portfolios stuffed with government bonds, this is going to be a problem. Bonds will probably lose money as rates rise, particularly in Europe and the UK. At Hamnett Wealth Management, we are focused on reducing this risk for our investors.

The US official short-term rate stands at 2.25%, higher than in Europe, Japan or the UK, but still well below its long term average of 5%. As rates rise investors are likely to be hurt, particularly those with a more cautious risk appetite. We have been diversifying into assets that are less vulnerable when rates rise, and have also built up some cash.

A key problem for UK investors is uncertainty about the Brexit negotiations. We hold a lot of your portfolio outside of sterling – which should protect against a ‘hard’ Brexit outcome, where we expect the value of the pound to plunge. To balance against the Brexit negotiations turning out surprisingly well for the UK, we also hold currency options that will protect against a soaring pound.

Overall, we remain neutral on equities: a growing world with moderate inflation is good for businesses and earnings, and share prices should remain firm, if more volatile than recent years, even if some markets look moderately expensive. We remain underweight credit, since investors aren’t being paid enough to take on the risk of heavily borrowed companies defaulting.