Dubai, United Arab Emirates (CNN) — People all over the world are looking for ways to protect themselves from the impact of high inflation, and the wealthy are no exception.
HSBC Wealth and Personal Banking CEO Nuno Matos told CNN that investors around the world are “not the usual business”, with many looking to sell what they see as riskier bets and “buying more protection for their portfolios”.
“We’re seeing clients sitting a bit on the sidelines,” Matos said in an interview Monday, adding that many have switched to bonds as they look for some “stability.”
“There is one common element that we are all worried regarding,” he added.
Inflation is putting enormous pressure on families around the world as they struggle with the rising cost of living, as well as straining the profits of many businesses. Economies are slowing, and recession fears are mounting.
Stocks are also suffering as a result, global markets have fallen more than 20% so far this year.
The annual inflation rate in the European Union is 9.1%, while it is still 8.3% in the United States. UK inflation recently hit a 40-year high before declining slightly to 9.9% last month. Parts of Asia are also seeing rising prices.
This, according to the World Bank, has led to central banks raising interest rates “with a degree of synchronicity not seen in the past five decades”.
Matos told CNN how Europe’s largest bank is advising its clients, which include high net-worth and individual investors, to play a defensive role.
For starters, diversification – one of the golden rules of investing for a long time – is now not only a good thing but a “mandatory”, as the CEO said.
He also suggested investors look for “value” stocks once morest “growth” stocks, primarily prioritizing large companies with stable market share and healthy payments to shareholders over other fast-growing companies.
Even with many people selling assets, “you want to keep investing,” Matos said, noting the negative effects of holding cash during a period of high inflation.
The banker also said his team was bullish on the strength of the US dollar, in part because he felt the US economy was “surpassing the storm better for example than the European economy.” The US dollar rose to approach a 20-year high, while many other currencies fell.
Matos also said that investors can use this time to access trends that are becoming more important and that will remain, such as the demand for energy independence and supply chain solutions.
He expects the current holding pattern among investors to continue until the middle of next year, when markets will have a better understanding of how interest rates will stabilize and get “breathing space”.
