Cycle of rate hikes is over – are your investments aligned?

Investors need now to ensure their investment portfolios are ready for “a new era” as central banks become seemingly convinced that no further interest rate rises will be needed in this monetary cycle.

This assessment from Nigel Green of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organisations, comes as policymakers in the US, UK, Japan and Switzerland all decided to keep rates steady last week.

He comments: “We’re in a transition period ahead of a new monetary era as most of the world’s most influential central banks are now anticipated to cut interest rates in the next quarter of 2024 rather than raise them.

“This is because we’re heading into a stage of lower growth and lower inflation.”

With central banks, it appears, having reached a consensus that no further interest rate hikes are likely to be needed, investors must recalibrate their strategies.

Diversification remains a foundational strategy in managing investment risk. Investors should consider allocating their assets across various classes, including equities, fixed income, real estate, and alternatives. 

Amid economic deceleration, it’s prudent to emphasise defensive stocks in your portfolio.

“These are companies that tend to exhibit resilience during downturns due to the essential nature of their products or services. Sectors like healthcare, utilities, and consumer staples often fall into this category. Companies in these sectors can continue to generate revenue even when consumer spending weakens,” says the deVere CEO.

“While economic growth may slow, technological advancements and innovation continue to shape the future. Investing in companies at the forefront of technology and innovation can be a smart move. This includes sectors like tech, biotech, and green energy, which may experience sustained growth as society seeks solutions to pressing global challenges.”

He goes on to add: “Also, consider investments with a fixed income component to match your risk tolerance and income needs.”

In addition, emerging markets, notes Nigel Green, can present attractive opportunities during periods of global economic slowdown. These markets often exhibit higher growth potential compared to mature economies. “However, they also come with higher volatility and risks, so thorough research and a long-term investment horizon are essential.”

Navigating the complexities of investing during economic slowdowns requires careful planning and expertise. Seeking advice from a financial advisor can provide you with a tailored investment strategy based on your unique financial goals, risk tolerance, and time horizon.

“The world is about to shift into a new era, and your investments should be aligned accordingly if you’re serious about creating, growing and safeguarding your money,” says Nigel Green.

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