Investors must prepare themselves for the Covid-19 “aftershocks”, deVere CEO Nigel Green has warned.
It comes as concerns mount over the economic slowdown in China, global inflationary pressures and turbulence in emerging markets.
Green says: “Covid was like a monumental earthquake that shook the world economy to its foundations – and like major earthquakes, there are potentially highly damaging aftershocks.
“For many, life is almost back to normal, but investors need to be aware of the ongoing multiple investment headwinds that have come about as a direct result of the pandemic.
“It’s our belief that there are three main causes for growing concern that could hit investors’ returns.”
According to Green, Chinese growth could slump below 5% which would have serious and far-reaching effects for economic growth across the world.
In addition, the world risks inflation moving from ‘transitory’ to ‘permanent’ if high prices for commodities and supply chain disruptions continue into 2022. This could lead to higher and faster rises in interest rates than expected which could trigger ongoing global stagflation.
Lastly, the threat of rising inflation has increased the pressure on central banks to ease their stimulus programmes earlier than anticipated which in turn will create greater turbulence in emerging markets.
Green says: “Despite these aftershocks, which would normally drive investors to increase their exposure to fixed-income, it’s almost universally agreed that stocks will continue to outperform bonds. There’s no real alternative.
“Given the mounting upheaval, investors should stay in the market but should review their portfolios to ensure that they are properly diversified across asset class, sectors, regions and currencies. This will best position them to get the best outcomes.”
Green added: “The increasing worry about the aftershocks to the global economy will continue in the near term. What will savvy investors do? Judiciously buy more stocks.”
