Inflation and geopolitics are the biggest threats to investors

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Inflation is one of the biggest risks to the global economy, said Huw Davies, associate bond fund manager at Jupiter Asset Management, during the forum’s roundtable.

Following Russia’s invasion of Ukraine, he also expects “regional growth to suffer” in the future. Europe is heavily compromised, especially given what has already happened with supply chains, while the US and Asia seem slightly divorced, but will obviously be affected by the sharp rise in commodity prices. raw materials, he explained.

“I think the inflation problem is much bigger than what people really appreciate, and in particular the longevity of the inflation process,” Davies said.

Echoing Davies’ view that inflation is a major risk facing investors, Paul Mitchell, senior fixed income investment specialist at HSBC Asset Management, said geopolitical risks must be considered by Investors.

“When you have a ground offensive around nuclear power plants, it’s pretty scary. It’s a new kind of volatility in the market,” Mitchell said.

The geopolitical situation will make inflation higher in the near term, but the backdrop makes tightening even more difficult for central banks. And again, that will lead to a more volatile environment for investors, he added.

Mitchell also pointed out that the withdrawal of liquidity from the markets is another risk that investors underestimate.

Unknown

Henry Chui, Asia-Pacific private wealth manager at Nuveen, warned investors of “unknown factors” that could disrupt markets.

There is no doubt that the protracted conflict is one of the biggest risks people see in global economic markets right now, Chui said.

However, whether it is Russia’s invasion of Ukraine, which could escalate into a wider conflict, or monetary and fiscal tightening, as well as inflation, these are factors that investors already know.

“But I think what we don’t take into account are the unknown factors, such as the resurgence of Covid-19,” he said, adding that investors should keep a diversified portfolio, including different assets. that would work well in different environments, and even different liquidity profiles to build resilience.

From the good side

Besides all the risks, Cosmo Zhang, research analyst at Vontobel Asset Management, also pointed out some potential opportunities for investors.

“In fixed income, before the second half of 2021, China represented a much greater risk than the opportunities it could provide, and that’s why we were underweight Chinese bonds over the past 18 months,” Zhang said.

Today, Zhang believes that China offers more opportunities than risks, especially for Vontobel AM as a fundamentally-oriented, bottom-up investor.

“Valuations don’t make sense. If you look at some of the valuation of the bonds traded in the Chinese high yield sector, even the liquidation value of some of the bonds traded at the distress level should give us a very satisfying return for the next 18 months,” he said. -he declares.

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