How HSBC’s head of wealth suggests you protect your portfolio against inflation

Hong Kong
CNN business

People all over the world are looking for ways they are protected from the effects of high inflation, and the rich are no exception.

Nuno Matos, chief executive of wealth and personal banking at HSBC, told CNN Business that global investors were “not being as active as they used to be,” with many looking to sell what they see as riskier bets and “buy more protection for their portfolios.” “.

“We see clients sitting a little bit on the sidelines,” Matos said in an interview Monday, adding that many turned to bonds as they sought “stability.”

“There is a common element that everyone is very concerned [about]”, he added.

Inflation is putting tremendous pressure on households around the world as they face higher living costs, as well as squeezing the margins of many businesses. Economies are at a standstill, and Recession fears are rising.

As a result, stocks are suffering. The global market is down more than 20% so far this year.

Annual inflation in the European Union is 9.1%, while the rate in the United States remains at 8.3%. UK inflation, which recently hit a 40-year high, eased slightly to 9.9% last month. Parts of Asia are also raising prices.

This has led central banks to raise interest rates “with a degree of synchronization not seen in the past five decades,” according to the World Bank.

Matos told CNN Business how Europe’s biggest bank was advising its clients, including high-net-worth and retail investors, to play defensively.

To begin with, diversification – one of the golden rules of investment – is now not a pleasure, but “mandatory”, said the executive.

He also suggested investors look at “value” stocks over “growth” stocks, essentially preferring large companies with stable market share and healthy payouts to shareholders over other growing businesses.

Even though many people are selling assets, “you want to keep investing,” Matos said, noting the harmful effects of holding on to cash during a period of high inflation.

The banker also said his team was bullish on the strength of the US dollar, partly because he believed the US economy was “weathering the storm better than, for example, the European economy”. The US dollar is near 20-year highs, while many other currencies have fallen.

Matos also said investors can use this time to get into trends that are becoming increasingly important and here to stay, such as energy independence demand and supply chain solutions.

He predicts the current pattern of investor complacency will last until the middle of next year as markets gain a better understanding of how interest rates will stabilize and have “some breathing space”.