In tough economic times having a long-term investment approach as well as a balanced and diversified portfolio are even more critical.
According to the Office of Budget Responsibility (OBR), the medium-term fiscal outlook for the UK has materially worsened since its March forecast due to a weaker economy, higher interest rates, and higher inflation.
The OECD is also the latest economic forecaster to predict rough times ahead for the UK, with the economy projected to be the worst performer in the G20 over the next two years except for Russia - a country that is suffering from a wide range of international sanctions, Laith Khalaf, head of investment analysis at AJ Bell said.
“Indeed, the UK may already have entered a recession, with the economy slipping backward by 0.2 per cent in the third quarter of the year, according to the Office for National Statistics.
“The Bank of England and the OBR are also now forecasting a prolonged period of weak or negative economic growth stretching through 2023 and into 2024, though it must be said their estimates are built on market expectations for interest rate hikes.”
The situation is not that much better elsewhere.
According to the OBR, over the past six months, the global energy and food supply shocks emanating from Russia’s invasion of Ukraine have intensified.
The further curtailment of Russian imports saw European wholesale gas prices rise ten-fold from pre-pandemic levels, and markets now expect prices to remain four times higher in the medium term.
Rising energy, food, and other goods prices have pushed up the interest rates set by inflation-targeting central banks to levels not seen since the 2008 financial crisis.
This has taken much of the wind out of the global economic recovery from the pandemic.
With major Asian economies - notably India and China - not as exposed to high energy prices as their European counterparts and perhaps able to develop policies to stimulate economic growth, is Asia a suitable diversifier for investment portfolios?
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