“Welcome news for savers with cash in the bank can be a warning of challenges ahead for shares and bonds”, SVM Asset Management has reported.
The firm said that investors must be aware of the risks in shares, it doesn’t signal the end of the economic cycle and global growth remains robust, with little sign that inflation is “out of control”.
It advised that investors think carefully about their portfolio focus, but to also bear in mind that sharp market falls, although painful, can create opportunity.
SVM Asset Management managing director Colin McLean warned that “the shift in inflation expectations should concern investors in bonds and gilts. The last 10 years have been extraordinary for monetary policy and central banks are moving back towards more normal behaviour”.
McLean further commented that some governments and companies have been allowed to borrow on unrealistic terms that don’t seem to recognise their credit history, leaving bond investors “lulled into a false sense of security”.
The firm predicted that “businesses dependent on UK consumer confidence will disappoint this year” and that many high-street retailers will struggle as a result of the relentless rise in online shopping. “Indeed, a range of sectors are being disrupted by new entrants. This is not just driven by new technology, but a change in tastes that favours experiences over things,” McLean said.
However, although the stock market may be more volatile this year, the firm advised that “longer term investors should view this as an opportunity”.
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