The ongoing pandemic, uncertain economic growth in China and high inflation will pose headwinds for investors in 2022, warns deVere Group CEO Nigel Green.
Green said: “Headwinds are likely to outnumber the tailwinds in 2022 as the world continues to readjust to the post-pandemic era. Currently, there are three main issues that investors should be monitoring carefully and depending on their portfolios, taking steps from which to mitigate the risks.”
High inflation typically results in higher interest rates from central banks, which results in a dip in consumer and business spending, while borrowing becomes more expensive, economic activity slows and financial markets fall, says Green.
In December, the Bank of England made the decision to raise UK interest rates for the first time in more than three years in an effort to combat soaring inflation, after the US Federal Reserve forecast that the country would introduce three rate increases this year.
Uncertain economic growth in China also poses a challenge for investors, says Green.
“Much of the recent slowdown has been fuelled by the wider impact of the collapse of huge property developers such as Evergrande. There are now serious worries that this could initiate a worrying credit crunch that would be disastrous for the world’s second largest economy, which would have global repercussions,” explained Green.
The recent regulatory clampdown on tutoring and other sectors such as gaming and ride-sharing highlights the Chinese government’s new way of thinking and its increasing push for control on private enterprise, Green added.
Investors will also need to brace themselves for the repercussions of the Covid pandemic, with ongoing uncertainty about how it will play out in the longer term. According to Green, the pandemic has raised questions including whether economies will be impacted by the introduction of new restrictions, which sectors will be hardest hit and how workforces will be impacted.
However, Green says investors should remain invested, despite a year of volatility ahead.
He added: “As we know, history has shown us that markets tend to go up over the long term. But as the world moves ahead to a post-pandemic era, it’s crucial that investors ensure their portfolios are suitably diversified across asset classes, sectors, currencies and regions so as to make the most of the considerable opportunities that will inevitably present themselves.
“Investor portfolios must reflect the future, not the past.”
[Main image: mila-young-BX0Mm9fazTI-unsplash]
