Gilt Market Tells Bank of England: It’s Time to Hike Rates

🎟️ Join The Art of Investing LIVE at Lord’s Cricket Ground! Join Rich, Mark and Chris in the Long Room at Lord’s Cricket Ground on 13th October from 6:30pm for a special live edition of The Art of Investing. The event is completely free – sign up here: https://www.ig.com/uk/the-art-of-investing-live 📈 Download the full Portfolio Performance Slides View the portfolio breakdown: https://drive.google.com/file/d/1rFogEtPVezVOYbnAOU5t7dIVutJRiWWU/view?usp=drive_link 📧 Get in touch: [email protected] 📱 Behind the scenes: @_theartofinvesting on TikTok 🎧 Apple: https://podcasts.apple.com/gb/podcast/the-art-of-investing/id1825201965 🎧 Spotify: https://open.spotify.com/show/4bmvfbDz2kniwxCL66sVjH This week on The Art of Investing, Rich, Spice and CJ are joined by Kieron Lynch, a gilt market veteran whose career began during Britain’s 1976 financial crisis and spans 50 years across the UK bond market. With oil above $100, bond yields climbing and central banks facing increasingly difficult decisions on interest rates, Kieron looks back to the inflation crisis of the 1970s to ask what investors and policymakers can learn from history. The team explore why credibility matters so much to bond markets, whether the Bank of England is falling behind the curve and why treating inflation as “transitory” can be such a dangerous strategy. Kieron also explains what would need to happen before he becomes confident buying long-dated gilts again. Plus, the team assesses another difficult week for the portfolio as rising oil prices, a stronger US dollar and changing expectations around AI investment put pressure on commodities and emerging markets. This Week’s Highlights: 🕰️ What Can Investors Learn From the 1970s? Kieron takes us back to Britain’s 1976 financial crisis, when soaring inflation, negative real yields and collapsing confidence ultimately forced the UK to seek help from the IMF. 📈 Why Inflation Comes in Waves From the oil shocks of the 1970s to today’s disruption around the Strait of Hormuz, Kieron explains why defeating one inflationary shock doesn’t necessarily mean the problem is over. 🏦 Is the Bank of England Behind the Curve? The team questions whether incremental rate rises will be enough, with Kieron arguing that markets need convincing evidence that policymakers are serious about bringing inflation under control. 💷 Are Gilts Finally Becoming Attractive? With long gilt yields approaching 6%, Chris and Kieron debate whether current yields represent an opportunity – or whether investors should wait for stronger action from the Bank of England. 🤖 AI Hits a New Roadblock Warnings from leading AI executives over safety and the pace of development hit global chip stocks, while raising questions about whether hyperscalers could begin slowing their enormous capital expenditure plans. 🛢️ Oil Puts Markets Under Pressure Brent climbs to around $108 while US oil reaches $100, increasing inflationary pressure and contributing to a difficult week for commodities and other risk assets. Portfolio Snapshot: 📊 Weekly portfolio performance: -1.2% 📅 2026 year-to-date return: +10.8% Commodities were the biggest drag this week, with copper falling around 6% and BlackRock World Mining down around 5%. Emerging markets also came under pressure as semiconductor stocks fell, while the FTSE 100 was the portfolio’s strongest-performing risk asset. Portfolio Changes: No portfolio changes this week. The team debate adding longer-dated gilts as yields approach potentially attractive levels, but ultimately decide to wait and see how the Bank of England and other major central banks respond. The portfolio therefore maintains its 15% cash position and 2.5% allocation to short-dated gilts. Big Questions This Week: - What can today’s investors learn from Britain’s inflation crisis in the 1970s? - Is the Bank of England falling behind the curve? - Why is credibility so important when central banks fight inflation? - Are long-dated gilts finally becoming attractive at current yields? - Could slowing AI investment reduce the competition for capital? - Are resilient equity markets signalling strength or creating a false sense of security? Disclaimer: This podcast is provided for educational and informational purposes only. The content presented is not intended as personal investment advice or a recommendation to buy, sell, or hold any particular securities or investments. All discussions regarding the model portfolio are illustrative and for educational purposes. Your capital is at risk. The value of shares, ETFs and ETCs can fall as well as rise, which could mean getting back less than you originally put in.