Hello, this is Jeremy Richardson from the RBC Global Equity Team here with another update. Now the pattern of geographical performance has largely remained consistent over the course of the summer, and we’re still seeing generally weakening economic data coming out of China, and that’s leading to weaker equity performance as well. Conversely, results out of the US appear still to be stronger in terms of economic data, and Europe is sort of squeezed somewhere between the two.

However, we have seen some volatility coming from the US market. The MS&I World Index actually fell by 5% from peak to trough over the course of August. If we think about the reasons why that is, it's generally, I don’t think, because of what companies have been reporting. So, over the course of August, we came to the end of the Q2 earnings season, and if we look at that earnings season as a whole and try and learn the lessons of what the companies have been telling us, I think one of the things I take away is that there haven't been significant negative surprises. Yes, there’s obviously been dispersions, certain industries have done better than others and individual companies have had their own paths to take.

But looking at it as a whole, we haven't seen repeats of some of those big issues that the markets were negatively surprised about in previous quarters, like, for example, tightening conditions in US financials, or inventory issues amongst retailers. In fact, one area that has actually been quite encouraging, in particular, has been the semiconductor industry, which has been of particular interest to many investors, given its role and significance with respect to artificial intelligence.

And there are a number of companies that reported good results, and some which have actually beaten expectations quite significantly. So that's been, I think, a more positive development.

So why did we see some degree of volatility over the course of the summer then, if it wasn't down to the earnings of companies? Well, I think it's largely still down to the sort of macroeconomic discussion I think a lot of investors have been caught up in, particularly relating to the outlook for inflation and interest rates.

If I think about the relationship between those two, and if you back out the rate of inflation from the rate of interest, you get a sense of what the real rate of interest is. We can see that when we do that, that the monetary conditions have been significantly tightening really since the end of 2021, where we went from -1 real rate of interest, using a ten-year horizon here to judge that, through to about a +2% level today. That's a very significant change and very, very unusual in the context of that longer sort of time series. However, to put that 2% where we are today of real rates of interest in context, it does bring us back to roughly where we were prior to the financial crisis.

So, you won't hesitate to use words sort of normalized because obviously the past, it might not necessarily be a good guide to the future, but it is perhaps some comfort that we've had a significant amount of change already, which should mean that the amounts of change still to come should be relatively modest. And one of the reasons why that is likely to be the case is because US inflation, it seems to be sort of coming in line with expectations.

That was certainly the case in August and the Fed still is sort of communicating that it is expecting that those inflation data will gravitate down towards its longer-term target. And if it does, that would be a very encouraging development, I think, for equity investors, particularly those like ourselves who are focusing on individual companies, because it's when the macroeconomic controversy recedes, actually investors can once again focus on those companies’ fundamentals, and those fundamentals will end up driving share prices.

And as we know from the many years that we've been investing in the long term, it is the company fundamentals, the cash flows, the profits, the dividends of individual businesses, that is the single biggest determinant of long-term value creation. So, we've been very much focused on those key drivers. I hope this has been of interest and I look forward to catching up with you again soon.