How should investors build a diversified portfolio when bond yields are rising, inflation remains a risk and the AI boom is reshaping global equity markets?
In this episode of the Asset Allocator podcast, Aamina Zafar and David Thorpe are joined by Darius McDermott, managing director of Chelsea Financial Services, to discuss how investors can position portfolios for today's market environment.
McDermott explains why higher bond yields can affect equities as well as fixed income, and why traditional geographic diversification may no longer work quite as expected as AI-related stocks become increasingly important across the US, Asia and emerging markets.
The conversation explores how investors can diversify beyond the dominant AI theme, including opportunities in UK equities, infrastructure, energy, water and waste, global insurance, private equity and defence.
They also discuss what a more defensive portfolio could look like, from short-duration bonds and gilts to cash, gold and lower-beta equities, and why understanding correlations between different assets becomes particularly important during periods of market stress.
Plus, McDermott explains why Chelsea Financial Services reduced its exposure to longer-duration gilts and US Treasuries and why higher yields could now make parts of the gilt market increasingly attractive again.
00:00 - How higher bond yields affect equities
04:01 - How to diversify beyond the AI trade
05:53 - How to build a defensive portfolio
08:43 - Can alternatives replace bonds and equities?
12:51 - How Chelsea Financial Services changed their play
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