Half of investors believe that inflation will remain stubbornly high in the next 18 months, despite signs that the surge in consumer prices might have peaked.

A pulse-check survey of 538 investors on LinkedIn carried out by deVere Group reveals that in 18 months’ time, 50% believe that the headline consumer price index (CPI) will be above 7%. Some 35% said between 4% and 7%; and 11% said between 2% and 4%. Below that, it dropped to a mere 3% who said it would fall under 2%, and 1% said they didn’t know.

Since January 2012, the Federal Reserve’s policy-setting Federal Open Market Committee’s explicit longer-run annual inflation goal has been 2% “as measured by the annual change in the price index for personal consumption expenditures.”

Looking at the poll’s findings, clearly, most investors are still concerned that inflation will remain a major issue in the short to medium term.

Given their fears about CPI, it’s reasonable to assume that they believe that in order to fight inflation, which has recently been at multi-decade highs in many countries, central banks will continue to implement rate hikes in the foreseeable future in order to prevent inflationary pressures from becoming entrenched.

Some of the drivers of the historic high inflation rates we’ve been seeing are subsiding.

For example, commodity prices are coming down; and supply chain issues are decreasing – but we still have rising wages, and this will continue to drive core inflation, the fallout from which will be the worry for investors.

The monetary policy cycle is now increasingly in-synch globally, and that this is good news to slow overall demand to address demand-related inflationary squeezes.”

However, as the poll highlights, CPI is still a significant headwind for investors.

Their concerns are likely to be exacerbated because, due to the high uncertainty clouding the outlook, central banks are finding it difficult to provide basic guidance about the future trajectory of monetary policy.

Investors must buy wisely in this volatile environment. It truly is a buyer-beware environment.

Bear in mind that long-term and short-duration assets respond differently to rising inflation and interest rates.

In addition, against the current backdrop, you should be considering less familiar, return-enhancing asset classes, which could include venture capital, structured products, cryptocurrencies, high-dividend stocks, hedge funds and managed futures, and real estate, amongst others.

While investors are aware that inflation is gradually being tamed, and it is the first priority for policymakers, it will remain a major issue that will require further tightening from central banks.

Therefore, sensibly, investors should adjust their portfolios accordingly to ensure they are best-positioned to mitigate risks to their wealth and to seize the opportunities that volatile financial times always present.
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London-born Nigel Green is founder and CEO of deVere Group. Following in his father’s footstep, he entered the financial services industry as a young adult. After working in the sector for 15 years in London, he subsequently spent several years operating within the international space, before launching deVere in 2002 with a single office in Hong Kong. Today, deVere is one of the world’s largest independent financial advisory organizations, doing business in 100 countries and with more than $12bn under advisement. It specializes global financial solutions to international, local mass affluent, and high-net-worth clients. In early 2017, it was announced that deVere would launch its own private bank. In addition, deVere also confirmed it has received its own investment banking license.