The central banks have begun to withdraw some of the monetary support that’s been necessary in recent years. Nevertheless, their aim isn’t necessarily to shift their rates into clearly restrictive territory; instead, they’re seeking to reduce some of the existing stimuli and ensure that inflation moves steadily towards the target.

This distinction is important. Investors tend to react quickly to each inflation figure, but monetary policy is decided by taking into account a broader set of indicators, such as employment, wages, consumption, inflation expectations and financial conditions.

Our view is that the official rates may remain high for longer than the market had anticipated. This doesn’t necessarily mean further significant rises, but it does make a rapid and sharp fall less likely.

One of the factors causing the markets the greatest concern is the increase in public debt, particularly in the United States. This rise has led to a greater supply of bonds and helped keep yields on the long end of the interest-rate curves high.

However, this issue needs to be considered with a degree of perspective. The evolution of debt relative to the GDP depends not only on the public deficit, but also on the nominal growth of the economy. When GDP grows sharply, it can help to contain the impact of debt on this ratio.

Therefore, in the short term, the debate regarding debt sustainability may include both a fundamental component and a market-behaviour component. When investors become wary of long-term bonds, this very concern can fuel further selling and cause yields to move in an exaggerated fashion.

This explains why a long-term bond may appear attractive after a significant rise in yields, but this doesn’t mean that its potential for appreciation will be unlimited. If nominal growth remains above 5%, it’s difficult to envisage a significant and sustained fall in long-term interest rates.

An environment with high rates for a longer period of time can have different consequences, depending on the asset and the investor’s risk profile.

In terms of fixed income, current yields are providing more attractive opportunities than in previous years, particularly when it comes to short and medium-length maturities. However, the duration risk must be managed carefully; long-term bonds are more sensitive to fluctuations in interest rates and they may suffer if yields continue to rise.

As for equity, the picture is more selective. An increase in the cost of financing puts pressure on valuations, potentially affecting the most heavily indebted companies. At the same time, companies with strong balance sheets, an ability to generate cash and competitive edges may continue to provide opportunities.

It should also be borne in mind that certain sectors linked to artificial intelligence, data centres and computing capacity are driving a new wave of investments. The potential for growth is considerable, but so too is the risk; these are areas with demanding valuations and, in many cases, higher levels of debt.

Over the coming months, we’ll closely monitor developments in core inflation, energy prices and the impact of geopolitical and commercial tensions. Another rise in energy costs or a further upturn in international uncertainty could make the central banks’ task more difficult and delay any cuts in interest rate.

Conversely, a sustained slowdown of inflation, together with an orderly deceleration of growth, could allow for a gradual easing of monetary policy.