The economic slowdown in China, rising inflation and turbulence in emerging markets have been flagged as three major areas of concern for investors, according to deVere Group CEO Nigel Green.
“COVID was like a monumental earthquake that shook the world economy to its foundations – and like major earthquakes, there are potentially highly damaging aftershocks,” said Mr Green.
“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.”
China’s economy is now expected to slow faster than previously anticipated, with the potential for “serious and far-reaching effects” globally.
“Growth could slump below 5 per cent as a perfect storm is brewing with Beijing moving to reduce its dependence on real estate, to increase regulation in a range of key sectors from education to technology, plus they’re dealing with a serious energy crisis and the lingering impact of the pandemic,” Mr Green said.
Inflation moving from transitory to permanent is also a key risk for investors, potentially triggered by higher commodity prices and continuing supply chain disruptions.
“This will mean that interest rates rise higher and faster than the markets expect, which could trigger ongoing global stagflation,” said Mr Green.
The latest data from the Australian Bureau of Statistics found that underlying inflation had reached 2.1 per cent, entering into the Reserve Bank of Australia’s target range of 2 to 3 per cent for the first time in six years.
Mr Green said that the threat of rising inflation was likely to create turbulence in emerging markets.
“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,” he suggested.
“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.”
DeVere recently drew attention to the “undeniable value, necessity and rewards” of sustainable investing and highlighted that 44 per cent of its clients were now considering exposure to ESG investments, compared with 26 per cent a year ago.
