Investors may still find profitable opportunities ahead despite tough financial times gripping the global economy, according to one wealth manager.
But there’s also a rocky road ahead for the world’s economies.
The forecast has been made by Towry’s head of investment Andrew Wilson who says that investments in natural resources will become ‘interesting’.
“When it comes to natural resources we anticipate inflation and, as an asset class, it is looking fairly valued at the moment but these will become an increasingly interesting asset class,” he said.
Investors looking to speculate on currency markets are going to see a bumper year and Andrew predicts there will be ‘huge possibilities’, especially before government bonds offer better yield rates.
He points to the US dollar as being a particularly interesting opportunity – and says it is currently vulnerable but for sterling-based investors should do well.
US dollar and FX markets
“In addition, real assets which are priced in dollars are generally attractive,” he said.
However, Andrew is also predicting the re-emergence of volatility in asset markets which will create an unsteady investing environment but those with specific strategies to counter these turbulent times will prosper.
Andrew explained: “By following strategies, I am talking about things like macro investing, then these investors should, I think, prosper. There will be a big variation between those investors who are winners and those who are losers.”
To become a winner, investors should decide now on their strategies for the dollar and FX markets which will generate significant money-making opportunities over the next 18 months as the markets become increasingly volatile.
Investors though should be wary about putting too much of their asset portfolio into China and Japan.
One of the reasons for market volatility is down to the growing burden of debt in developed countries.
Tough political decisions
Andrew explained: “We need to see politicians become more accountable and acknowledge the scale of their fiscal problems this year.
Without that, there will inevitably be debt defaults and/or inflation across much of the developed world.”
He said politicians have some more tough decisions to make – and raising taxes will not resolve the issue of debt which means that further ‘austerity measures’ will see many vital and much-loved services being hit.
Andrew says the gap in many countries between what government’s spend and raise is unsustainable.
In the UK that gap is around £100 billion every year which is added to a debt pile that can only be serviced because interest rates are at an all-time low.
However, increasing the amount of money being printed and the spectre of inflation are now inevitable, which will bring a variety of issues for investors as the markets around the world react to the changing environment.