Investors should take action to review their investments in light of rising inflation and the Bank of England’s interest rate hike, says deVere Group CEO Nigel Green.
On 16 December 2021, the Bank of England policy committee voted 8-1 in favour of raising interest rates from a historic low to 0.25%. It followed the announcement from the Office for National Statistics that inflation hit a 10-year high of 5.1% in November.
The interest rate rise also came hot on the heels of the Federal Reserve meeting which set the stage for earlier, faster interest rate hikes, forecasting three rate increases next year. Elsewhere, China’s factory-gate prices grew at the fastest pace in 26 years.
Green says: “From the UK to the US, China to Europe, amongst most other economies, inflation risks are real and they’re building. This will increasingly rattle the markets.
“Throughout 2021, the debate was whether soaring inflation is transitory. This debate is now over. Why? Because the fallout from the pandemic has also not been transitory. Ongoing supply issues, new variants and global disparities in dealing and managing them has resulted in prices having to rise.”
According to Green, the debate in 2022 will focus on how investors can manage the inflation risk.
Green explains: “There are real opportunities to be had, but navigating the territory is set to become more complex in the coming months as we move towards a new era of interest rate normality.
“There will be a steady flow of interest rate hikes from most major central banks throughout 2022.”
Green believes investors should remain in the market but review their portfolios to ensure they are properly diversified across asset classes, sectors, regions and currencies.
He added: “Inflation is set to be the number one investment headwind facing us in 2022. Now is the time to review portfolios.”
