No doubt you've read enough articles about interest rates, inflation and recessions – and it was the subject of last week's Trustnet comment – but we've had another big week on that front so here's another... 
For those who’ve been on a tropical beach, a digital detox or under a rock for the past few days, a quick recap. The first surprise was the UK's latest CPI print - it was unchanged at 8.7% while core inflation rose, adding to fears inflation is becoming entrenched.
The second was the Bank of England's base rate hike yesterday. A rate rise was virtually guaranteed after the previous day's inflation numbers, but the surprise was a 50 basis point hike rather than the expected 25bps.
The base rate now stands at 5% and some investors think there's a real chance it will get to 6% should the Bank fail to get a better grip on inflation. And that is proving to be a hard ask. M&G's Claudia Calich pointed out that inflation is now lower in emerging markets than in the UK for the first time in 20 years.
Source: M&G, Bloomberg
Listen to the government minister on the Today programme or the like and they'll no doubt trot out the line that "inflation is high everywhere".
That's not incorrect but the situation seems especially dire in the UK. We've been hit by the same elevated food and energy prices as the rest of the world, that's true, but we have the extra kicker of Brexit adding to tightness in labour markets and supply chains.
This has led to the UK suffering from inflation that is much stickier than most other parts of the world. After 13 rate hikes, the consumer price index remains more than four times higher than the Bank’s official 2% target.
This dynamic isn't going to disappear any time soon so rates in the UK are only heading in one direction for the foreseeable future.
As discussed last week, central banks are willing to flirt with recession to quash inflation but Bank governor Andrew Bailey said it is not seeking to trigger a recession. However, the developments this week have increased the risk of this happening.
Man GLG portfolio manager Craig Veysey said: “Our view is that a recession in the UK is unfortunately inevitable, probably at the turn of the year.”
One asset that some think looks interesting in this environment are gilts, or UK government bonds. Gilts tend to fall during times of high inflation and rising rates – just look at what happened last year.
However, those falls mean that gilts are looking attractive compared to much of their recent past. The 10-year gilt is yielding 4.36%, compared with 3.79% from US treasuries and 2.49% for German bunds. Gilts are even yielding more than the so-called PIIGS (Portugal, Italy, Ireland, Greece and Spain) that were at the heart of the eurozone debt crisis.
Veysey said: “Many investors will see long maturity gilts as particularly attractive at this point versus other major economy developed market bond yields; they are likely to be useful for a negative growth/lower inflationary environment, with a longer-term view in mind.”
Fidelity’s Graham Smith pointed out that medium-dated gilts have similar yields to the aftermath of last September’s disastrous mini Budget, when inflation was over 10%.
“That seems to imply an overly pessimistic view of the UK’s inflation outlook. It also suggests there are now opportunities for investors looking to improve the resilience of their portfolios with bonds,” he added.
He noted that fund managers have been buying gilts recently, highlighting that some funds run by fixed income giant PIMCO have gone overweight bonds.
“With growth now apparently treading a tightrope, bonds certainly look as if they have the potential to offer investors some additional security,” Smith said.
“That, for fund managers as well as individual investors, presents a diversification opportunity that’s becoming increasingly hard to ignore.”
For me, the key sentiment is the chance to add diversification, not the suggestion that buying gilts is a fast-track to stellar returns. With uncertainty still abound, investors should be trying to cover as many bases as possible rather than focusing on recent winners or silver bullets.