Navigating Q4 Investments in the Wake of Soaring Inflation


With U.K. energy prices spiraling upward, the latest grim economic outlook for pensioners, and inflation hitting a record 10.1% in July, analysts are advising that cash investments are the wrong place to be as we look toward Q4.

“All you do is guarantee the value of your investment is going down if inflation is as high as it is currently — at 10% per annum — so investors need to consider market recovery as the primary option,” said James Caldwell, Aisa Investment Group. “Missing the bounce that always happens after a fall — even missing one day where markets go back up — will have a serious long-term impact on performance.”

Aisa Group reported it had positive outcomes investing in gold and lithium during the first two quarters of 2022 but is now strategizing to re-invest back into established companies with solid profit streams that will benefit from inflation. Corporations within the energy and thematic sectors are becoming more attractive investment opportunities as is the Asian market, which is recovering from recent Covid lockdowns.

“Remaining invested in a diverse portfolio in these markets is the correct position even though there’s never a guarantee and understanding that there may be market additional declines and losses still to come—it’s about timing it right,” Caldwell said.

With wider global markets navigating the volatile seas in an uncertain economy, investors are looking for that beacon of light to help guide them through. June 2022 concluded the worst first half return for US equities (-20%) since 1962, US 10-year Treasuries (-10.8%) since the 1970s and High Yield (-10.2%) since 1989. During the last quarter, all major equity markets fell.

The FTSE 100 has seen a small but volatile rise over the last 12 months, having faired very well despite the downturn in other financial markets — up 0.92% gross from July 2021-July 2022, outperforming most other global markets. For comparison over the same period, the Dow Jones Index is down 11.91% gross over the same period.

Recent unexpected rapid interest rate hikes are also having an impact on investment decision-making. “Rising rates damage the capital value of bonds and Gilts – for every 1% increase there can be a 30% capital value reduction for longer term yield-based products, so this clearly impacts the lower risk element of portfolios,” Caldwell said. “Whilst we do invest some of our portfolios in commodities, this is often as a hedge and commodities historically are high-risk volatile investments – they go down as quickly as they go up and with large price swings.”

In its July 2022 meeting, Aisa Investment Group says it elected to take action on bond holdings as well by reducing clients’ exposure to any debt instruments that have been and will continue to be affected by rising interest rates. Aisa considered Absolute Return funds and REITs as alternatives, alongside some powerful Investment Trust strategies.

“In the short term, your portfolio may show a negative performance, but this cannot be avoided if you wish to also benefit from any possible upward recovery in Q4 and beyond,” Caldwell said.

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The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.


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jett.vercruse@aisainternational.cz'

Jett Vercruse

Jett Vercruse is an American freelance writer with a B.A. in Journalism, Cum Laude, and is currently completing a Master's Degree in Law at Charles University in Prague.

 


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