deVere Group CEO Nigel Green has identified inflation as the biggest concern for investors in 2022 and said that inflation risks were building in most economies.
Mr Green issued his warning on the back of the Fed signalling three rate hikes for 2022 and the Bank of England raising interest rates for the first time in over three years.
“Throughout 2021, the debate was whether soaring inflation is ‘transitory.’ This debate is now over,” said Mr Green.
“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.”
In its final interest rate decision of the year, the RBA removed any references to rates increasing in a particular year, while economists have forecast the first-rate hike in Australia will take place in late 2022.
“The board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range,” said RBA governor Dr Philip Lowe following the decision.
“This will require the labour market to be tight enough to generate wages growth that is materially higher than it is currently.”
Mr Green said the focus for investors will now shift to how to manage inflation during the next year amid a “steady flow of interest rate hikes from most major central banks”.
“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,” he said.
Investors should still remain in the market, according to Mr Green, while ensuring they are properly diversified across asset classes, sectors, regions and currencies in preparation.
“Inflation is set to be the number one investment headwind facing us in 2022. Now is the time to review portfolios,” he said.
