Risk Vs Return

Add pandemic fallout to a low interest-rate environment and you have a challenge for highnet-worth investors. Where might opportunities lie?

- Domini Stuart

Around the world, governments have been using fiscal and monetary stimulus packages to protect their economies from the disruption of COVID-19. As a result, global interest rates are hovering around zero.

“Rates fell as stimulation increased, which put more pressure on bond markets,” explains Will Hamilton, Managing Partner of Hamilton Wealth Partners. “At the same time, the pandemic compressed earnings so, for a lot of businesses, dividends were down.”

This environment is driving the wealthy individuals and families to rethink their investment strategies.

“Many have pushed up the risk curve and, as a consequence, we’ve seen equity markets reach all-time highs,” says Justin Gilmour, Managing Director of Integro Private Wealth. “Given the strength we’ve already seen in the markets, the question now is where do investors go from here?”

EQUITIES

Jasmin Argyrou, Portfolio Manager and Director of Private Banking at Credit Suisse, isn’t too concerned by inflation. “I don’t think it will rise quickly enough to negatively impact profit margins because the recovery in wage growth will be contained,” she predicts. “The policies introduced as a result of COVID-19 will continue to support equities by driving recovery in corporate earnings, and that will play out over both the short- and longer-term.”

The pandemic has accelerated some of the growth trends in place before 2020, most notably telehealth, and goods and services such as digitalisation and online learning that support working from home.