Should we all be worried about inflation?
We think investors should stay focused on inflation as part of their wealth strategy
2 min read
A big week for inflation
Inflation has long been an issue for the wealthy, eroding the value of cash year after year. But it’s also influential in how central bank’s determine their interest rate policy which is why bond markets were surprised by last week’s inflation numbers on both sides of the Atlantic. In the US, inflation rose more sharply than anticipated and in the UK it failed to fall as many had expected. The announcements didn’t slow the recovery in equity markets following the recent sell-off.
US inflation, as measured by the Consumer Price Index, grew by 0.5% compared to the forecast 0.3%. This resulted in annual inflation of 2.1%. Meanwhile, UK inflation stayed at 3% defying expectations it would start to fall.
These latest numbers, alongside recent commentary from central bankers on both sides of the Atlantic, have further raised expectations of interest rate rises from the US Federal Reserve and the Bank of England.
For wealthy individuals it’s important to think carefully about how you preserve the spending power of your wealth for the future, or even the next generation. Historically, equities have been the only major asset class to outpace inflation but investing in a way that suits your risk profile should always take priority. The last few weeks have been a reminder of the need to invest wisely, in a diversified portfolio or fund, to cushion the volatility inherent with equity investing.
At Coutts, as part of our diversified approach to investing – it’s one of our core principles –
we favour corporate bonds and emerging market local currency debt over government bonds as they are less vulnerable to rate rises. This is alongside our equity themes which include Europe, Japan and sectors such as technology and healthcare.
Become A Client
When you become a client of Coutts, you will be part of an exclusive network.
About Coutts Investments
With unstinting focus on client objectives and capital preservation, Coutts Investments provide high-touch investment expertise that centres on diversified solutions and a service-led approach to portfolio management. Our investment process is as disciplined as it is creative – ensuring tailored solutions with robust results.Discover More About Coutts Investments