Investment Company plc

September was a more testing month for markets. UK gilt yields rose sharply, with the 10-year reaching its highest level since 2007. Higher energy prices renewed concerns about inflation and the potential implications for monetary policy. This weighed on a broad range of asset prices, including gold.

However, in our view, these moves continue to fit our core thesis, as governments may increasingly favour shifting borrowing towards the short end of the curve and to retire longer-dated debt. If this trend continues, it will increase the pace at which higher rates feed through into government borrowing costs. At the same time, hyperscaler capital demand may continue crowding out other longer duration borrowers.

Real yields on shorter-dated index-linked gilts were broadly unchanged through the second half of the month. Bitcoin fell after the US Senate narrowly voted down the Clarity Act but recovered strongly, ending the month at an 8-month high. The SEC signalled alternative digital asset regulatory pathways, and BTC ETF inflows strengthened towards month-end.

Beneath the headline broad indices, equities were weak. More than 75% of S&P 500 stocks fell in September while the index itself fell by less than 0.5%. In Europe, French credit spreads widened amid fiscal concerns, and a proposed tax on airport and toll road operators weighed on infrastructure names, including our holding in Vinci. As we explained last month, we have been deliberately patient in building the strategic equity sleeve. We continue to see periods of weakness as good opportunities to add we believe hard-to-replicate assets at attractive valuations

The path anticipated by our investment thesis is unlikely to be smooth, and periods of market volatility will inevitably test it. In our view, high levels of government indebtedness increase the possibility that policymakers may tolerate periods of higher inflation or other forms of financial repression as part of managing debt burdens over the longer term. Against this backdrop we believe the Company's foundational exposure to reserve assets, together with inflation-protected instruments and a selective chosen equities, remains well suited to achieving its objective of preserving and growing the purchasing power over the long term.