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Remember 2021? Most of us entered last year with a misplaced optimism. From a volatile transition to a new US administration, a widespread Covid-19 vaccine rollout, rising inflation, an energy crisis, regulatory crackdowns in China and Omicron fears, “eventful” is an understatement when it comes to describing it. While Bloomberg announced that the S&P 500 reached record highs over 60 times, China and Hong Kong were among the weakest performers globally. This is unlikely to be repeated in 2022, however there are some themes that will remain important.
Investing sustainably can be 27 times more efficient than reducing meat consumption, taking the train instead of the car, taking fewer flights and shortening your shower time. Sustainable finance has gathered significant momentum. To achieve success, the private sector must play an increasing role in funding sustainable technologies and innovations.
Many investors are cynical about the responsible aim for investing (and the concept of ‘greenwashing’). It’s important to understand who is sincere about driving investment returns and positive change for the planet.
One of the risks that emerged in 2021 was inflation. The Fed officially retired the word ‘transitory’ in December and central banks have been taking a tougher stance to address inflation. Investors need to be vigilant and avoid overconfidence in any type of market speculation, particularly with investments. We expect to see volatility pick up again, with uncertainties prevailing from central bank tapering, and interest rate risks and economic, political and geopolitical uncertainties.
To ride this out, investors should be mindful of the impact of growing inflation on holding cash. Investments that can protect from inflation over time include physical assets and equities, noting that companies with an edge in the market will typically be passing on rising costs to customers in the form of higher prices charged for their goods and services.
Whenever certain markets or sectors have done well in the past, we receive the highest number of enquiries about investing there (and vice versa). In behavioural finance, this phenomenon is called “recency bias”. It can be damaging as it can lead to investors buying high and selling low since asset prices already reflect good or bad news coverage and investor views on trend continuation. Whilst our longer-term outlook on China is optimistic (benefiting many regional assets too), we’re not confident that we will see a trend continuation in China markets in the short term.
2022 will not mirror 2021. In summary:
- Sustainable investment is here to stay but be selective in your deployment
- Inflation is rising (off a low base) so don’t sit on excess cash and invest in inflation proof assets
- Interest rate increases are on the way so avoid over-leveraging
- The future for China is uncertain in the short term, so remain diversified across geographies in addition to industries, currencies, and asset classes.
Steve Settle works in tandem with Tristan Perry, Head of Tax at Select Investors Australia, to support expatriates with their financial wellbeing through integrated tax and wealth planning during their time in Singapore and beyond.
The value of an investment will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
Please note that Select Investors, a Partner Practice of St. James’s Place (Singapore) Private Limited and Select Investors Australia Pty Ltd do not work in legal partnership with each other and both are representatives of separate entities.
Contact Steve on email@example.com or +65 9776 0969 to arrange a consultation and discuss your planning needs for your financial future.
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The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives. Members of the St. James’s Place Partnership in Singapore represent St. James’s Place (Singapore) Private Limited, which is part of the St. James’s Place Wealth Management Group, and it is regulated by the Monetary Authority of Singapore and is a member of the Investment Management Association of Singapore and Association of Financial Advisers (Singapore). Company Registration No. 200406398R. Capital Markets Services Licence No. CMS100851. St. James’s Place Wealth Management Group Ltd Registered Office: St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP, United Kingdom. Registered in England Number 02627518.
Much of the content of this article was sourced from an article by Angelina Lai, Head of Division, Asia Investment at St. James’s Place. The full copy can be supplied on request.