Investors should brace themselves for three major headwinds in 2022, the CEO of deVere Group, Nigel Green, warned.
“Headwinds – the factors that weigh down growth and positive returns – are likely to outnumber the tailwinds in 2022 as the world continues to readjust to the post-pandemic era,” Mr Green said.
According to Mr Green, currently, there are three main issues that investors should be monitoring carefully and, depending on their portfolios, taking steps from which to mitigate the risks.
First, Mr Green explained, is inflation.
“It’s a risk that is a major concern for most investors around the world. Why? Because it kills returns by eroding the buying power.
“Of course, the other reason is that higher inflation usually brings higher interest rates in response from central banks. When rates are hiked, typically consumer and business spending falls, borrowing becomes more expensive, economic activity slows and financial markets fall.”
Second is China.
“The country’s economic growth is uncertain. Much of the recent slowdown has been fuelled by the wider impact of the collapse of huge property developers such as Evergrande,” Mr Green said.
“Plus, the regulatory attack on tutoring, and other sectors such as gaming and ride-sharing, appears to highlight the Chinese government’s new thinking and its increasing push for control of private enterprise,” he noted.
“Given the state-sponsored attack on private capital, investors will be required to take a leap of faith regarding China’s political strategies.”
Third is COVID.
“Whilst the markets have largely shrugged off the impact of the Omicron variant, there is still no certainty about how it will play out in the longer term. Will it impact economies due to the introduction of new restrictions? Which sectors will be hit the hardest? How will it impact the workforce? How will already shaky supply chains be managed?”
In addition, Mr Green noted, this uncertainty about growth, demand and investment is all kicking off as central banks and governments are withdrawing stimulus.
“However, it’s essential that investors stay invested. As we know, history has shown us that markets tend to go up over the long term,” he noted.
Mr Green advised investors to ensure their portfolios are suitably diversified across asset classes, sectors, currencies and regions, to make the most of the considerable opportunities that will inevitably present themselves.
He concludes: “Investor portfolios must reflect the future, not the past.”
Maja Garaca Djurdjevic
Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.
