People all over the world are looking for ways to protect themselves from the impact of stubbornly high inflation, and the wealthy are no exception.
Nuno Matos, CEO of Wealth Management and Personal Banking at HSBC, told CNN Business that global investors “are not as active as they used to be,” with many looking to sell what they see as bets. riskier and “buying more protection for their portfolios”. .”
“We’re seeing clients sitting a bit on the sidelines,” Matos said in an interview on Monday, adding that many had turned to bonds as they were looking for some “stability.”
“There is a common element that makes them all very worried [about],” he added.
Inflation is putting immense pressure on households around the world as they grapple with rising costs of living and squeezing margins for many businesses. Economies are stagnating and recession fears are growing.
Stocks suffer as a result. Global markets are down more than 20% so far this year.
Annual inflation in the European Union stands at 9.1%, while the rate in the United States remains at 8.3%. Inflation in the UK recently hit a 40-year high before falling slightly to 9.9% last month. Parts of Asia are also experiencing rising prices.
This led central banks to raise interest rates “with a degree of synchronicity not seen in the last five decades”, according to the World Bank.
Matos told CNN Business how Europe’s largest bank advises its clients, which include both high net worth investors and individuals, to play defense.
For starters, diversification – long one of the golden rules of investing – is no longer just nice to have but “mandatory”, the executive said.
He also suggested investors explore “value” stocks versus “growth” stocks, essentially prioritizing larger companies with stable market share and healthy shareholder payouts over other companies. fast growing.
Even though many people are selling assets, “you want to stay invested,” Matos said, noting the adverse effects of holding cash during a time of high inflation.
The banker also said his team was optimistic about the strength of the US dollar, in part because they felt the US economy had “weathered the storm better than, say, the European economy”. The US dollar hit near its highest level in 20 years, while many other currencies fell.
Matos also said investors can use this time to jump into trends that are becoming increasingly important and here to stay, such as the demand for energy independence and supply chain solutions.
He expects the current investor holding pattern to last until the middle of next year, when markets gain a better understanding of how interest rates will stabilize and get “some breathing room.”