The debate about whether inflation is 'transitory' or not is now over and investors should review their investments.
The warning from Nigel Green, chief executive of deVere Group, which has $12bn under advisement, comes as the Bank of England on Thursday raised UK interest rates for the first time in more than three years in an effort to combat surging inflation.
The BoE’s Monetary Policy Committee voted 8-1 in favor of the increase to 0.25%.
The move follows the US Federal Reserve in a meeting mid-week setting the stage for earlier, faster interest-rate hikes as inflation soars. The US Central Bank is now forecasting three rate increases next year.
Elsewhere, China’s factory-gate prices grew at the fastest pace in 26 years and consumer-price inflation has exceeded expectations.
Inflation risks real
Green says: “From the UK to the US, China to Europe, among 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, have resulted in necessary price hikes.”
He continues: “As inflation now becomes the biggest issue for investors, the debate throughout 2022 will shift on to how to manage it.
Interest-rate hikes: the new normal
“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 hike normality.
“There will be a steady flow of interest-rate hikes from most major central banks throughout 2022.”
Last month he opined that this is “the hardest time to be an investor and worst time not to be".
Properly diversify portfolios
Investors, he says, should remain in the market, but they should review their portfolios to ensure that they are properly diversified across asset class, sectors, regions and currencies. This will ensure they are best positioned for any eventuality in the current investment landscape.
“Inflation is set to be the number-one investment-headwind facing us in 2022. Now is the time to review portfolios."