Wealthy investors are planning on making “considerable additions” to their investment portfolios this year – despite red-hot inflation and historic interest rate rises to combat it, stagnant growth, tax hikes, Putin’s war in Ukraine and growing Covid-19 cases, according to a leading financial advisor.
As the U.S. Federal Reserve raised its key policy interest rate by half a percentage point, the biggest jump in 22 years, it has also vowed to shed assets from next month.
“Just when we all believed we were through the worst of the pandemic’s main economic challenges, the investment landscape shifted again,” said Nigel Green, CEO and founder of the deVere Group.
“We’ve got inflation that’s running at its highest level in decades and the world’s most influential central banks are raising interest rates, and will continue to do so in the near-term, in efforts to cool it,” he said.
“There are the global supply chain issues; the Russia-Ukraine war; and China’s Covid crisis, and the so-far-failed attempts to halt it, adding to global inflationary pressures by further disrupting supply chains in the ‘factory of the world’.
“Plus, the slowing of the world’s second-largest economy, which has been one of the fastest-growing for the last few decades, could have a dire ripple effect across the globe. There could be potentially considerable consequences for overseas trade, financial markets, and global economic growth,” Green said.
Top up portfolios
However, even in this stormy backdrop, high-net-worth investors are moving to top up their investment portfolios.
“Despite the headwinds, our clients are telling us that they are seeking to make considerable additions to their portfolios between now and the end of the year,” the deVere CEO added.
“As in-the-know investors, they understand that regardless of the headlines, much of the current news has already been priced-in by the markets.
“And they know that if there should be more ‘unsettling’ news to come, which seems likely, it will create significant buying opportunities to build their long-term wealth by topping up their portfolios at lower entry points.”
As reports of a global recession ramp up, investors have one way to maximise returns relative to risk: the time-honoured practice of portfolio diversification, explained Green.
“A considered mix of asset classes, sectors, regions and currencies offers protection from market shocks. A good fund manager will help investors capitalise on the opportunities that volatility brings and sidestep potential risks as and when they are presented,” he said.
Green concluded that savvy investors are staying invested and, in fact, increasing investments and not paying attention to or being spooked by short-term fluctuations and headlines.
“Working alongside an adviser, this is a solid strategy.”