Investors need to prepare for the coming UK recession, the CEO of one of a leading independent advisory and fintech has warned, as UK inflation hit 10.1%, a new 40-year high.
“UK Inflation is running red-hot and is set to peak at a staggeringly high 13% in October,” said deVere Group chief executive Nigel Green.
“The Bank of England can be expected to take strong action with interest rates potentially doubling by this time next year. This is a serious risk to consumption and the housing market via higher mortgage costs at a time when the UK economy is gasping for air,” he said.
Green said that inflation is still outpacing pay growth, eroding people’s incomes. Companies are under massive pressure as they see their own costs surge and consumer demand shrink.
“The threat of a longer-than-usual recession is rising,” he said, adding, “this is maybe because the UK’s central bank is hiking interest rates despite GDP likely to continue to fall well into 2023. Typically, they try and revamp the economy by lowering rates, not increasing them.”
With the Bank of England anticipating a prolonged recession to begin this year, the deVere CEO said that “the time is now” to prepare one’s finances.
Opportunities
“Recessions can often provide the best opportunities to create and build your long-term wealth,” said Green. “But you have to do it wisely.”
There are a variety of factors to consider, he suggested.
“You should take a look at stocks that are likely to be recession-resistant. For example, people will still need food, energy and financial services during a downturn. Therefore, investing in such firms can help shield you from the recession fallout.”
“Safe-haven assets, such as gold, typically do well in times of higher volatility.
“In addition, in an environment of rising inflation and interest rates, less familiar, return-enhancing asset classes which could include venture capital, structured products, cryptocurrencies, high dividend stocks, hedge funds and managed futures, and real estate, amongst others, should also be considered.”
Increasing an investor’s exposure “to risks that are not influenced by recessions is likely to make investments more resilient” in the medium to long term, added Green.
“Unlike in times gone by, we know this recession is on its way. It’s looming,” he concluded.
