Hello. This is Jeremy Richardson from the RBC Global Equity team, here with another update.

Two sources of volatility in markets recently, the first of which has been a series of regulatory announcements by the Chinese government pertaining to technology companies, really setting out how the Chinese government expects them to behave and operate in the future; that many of these announcements came as a negative surprise for investors, although I would argue that the issues that the announcements are seeking to address have got strong echoes with similar issues that we’ve already been seeing in Europe and North America. So, for example, control of user information or minimum wages for gig economy workers. It’s just that these really important issues were not adequately being priced into valuations in China in perhaps the way they should have been. ESG considerations were perhaps not so relevant up until very, very recently in the minds of those investors and that’s had to be forced—that’s been changed by force by the Chinese government with these announcements.

At the second issue to mention, that’s just been causing volatility and change within markets, has been a weakening of the already fragile consensus that has existed on that U.S. inflation pressures are transitory. This has been the view of the U.S. Federal Reserve, but the Chairman of the U.S. Federal Reserve very recently remarked that in his view, these inflationary pressures we’re seeing at the moment are proving to be larger and longer lasting than anticipated. That’s obviously led to investors both in both bond and equity markets shifting their opinion as to how to best array their assets in the light of every prospect of a speedier shift in monetary policy than they had initially anticipated.

Now that’s obviously had an impact upon equity markets and, therefore, the portfolio as well. But our view as stock pickers very much remains that firstly, it’s right to be longer—of a longer time horizon in mind, because if you do that then you will be able to factor in some of these contingent liabilities such as we’ve seen all of a sudden being adjusted into Chinese technology prices. And then secondly, in a world where there is perhaps a little bit more price volatility with more inflationary pressures, then it makes even more sense than ever to invest in great businesses because, importantly, these great businesses enjoy a winning business model. They have a competitive advantage, and that competitive advantage enables them to be able to better withstand some of these price volatility. And they can do that either by raising prices, because that competitive advantage gives them pricing power, alternatively choosing to reinvest that back into the value proposition that they offer customers, enabling them to take market share and, therefore, deliver organic growth independent of the macroeconomic outlook. So we think, more than ever, that combining a portfolio of great businesses at attractive valuations together with disciplined risk management enables us to build a portfolio that should be capable of delivering, as we like to say, many happy returns.