Threat of a global recession is “looming large”, says deVere Group CEO Nigel Green, who urges investors to diversify portfolios to protect themselves against rising volatility.
Green’s warning follows an announcement by the head of the International Monetary Fund that the organisation is set to downgrade its global economic growth forecast due to the impact of Russia’s invasion of Ukraine.
Prices of raw materials, energy, manufacturing parts and consumer goods were already surging at their quickest pace since the 1980s due to pandemic-triggered supply chain issues but the Russian invasion has exacerbated the situation.
Green says: “International supplies are now at breaking point and this in turn negatively impacts global production and therefore output, investment and jobs. Against this backdrop, developed economies are having to accept they are facing the increasing likelihood of a recession in 2022 because of ongoing supply chain disruptions and red-hot inflation not seen since the 1970s.
“The threat of a recession is highest in Europe due to the economic links of the region with Russia and Ukraine and its reliance upon Russian energy which will intensify the challenges.”
Geopolitical risks typically tend to drive investors away from riskier assets and towards perceived safe assets. But Green says investors need to tread carefully.
Green explains: “Cash is often considered a safe haven during periods of volatility but it’s going to be negatively impacted by soaring inflation. Rampant inflation means excess cash in your bank accounts will lead to losses in real value. Hardly a safe haven for those wanting to build long-term wealth.
“As the risks of a global recession ramp up, there remains one clear way for investors to maximise returns relative to risk: the time-honoured practice of portfolio diversification. A considered mix of asset classes, sectors, regions and currencies offers protection from market shocks.
“Investors would do well to review their portfolios now to ensure they are best-positioned.”
