Investing in a Low-Interest And Rising Inflation Climate
When looking at the current financial market in the UK you can’t help but feel somewhat unenthusiastic if you are building your savings. Unfortunately, the outlook is pretty grim for Britain’s savvy saver.
Low-Interest Rates and Rising Inflation
The weakening sterling combined with, low-interest rates, rising inflation, as well as slowing market growth is raising excitement for FTSE 100 companies, but the rest of us are left with increased inflation, which is expected to rise next year to 2-3% off the back of a weaker currency, and historically low interest rates which will more than likely hold for at least the next year or so.
Inflation can be a major headache for long-term savers. Over time, it can reduce the spending power of your money, unless you can ensure that your savings grow at least as fast as prices rise.
Repercussions Across All Asset Classes
The UK has suddenly become a cheap place to visit – and anyone with dollars and euros in their pockets will find UK assets, such as property, even more, attractive than it was previously.
Once the short-term concerns that are causing the pound to fall have been addressed, Sterling will most likely climb, though not necessarily to its pre-Brexit levels. So investing in sterling now while the price is depressed could provide lucrative opportunities to sell in the future. Such a course of action could, in turn, cause the FTSE to fall. So it may be a good time to sell shares and look towards more stable alternatives during this time of uncertainty.
Don’t Let Your Savings Suffer!
All of what has been mentioned above, coupled with the uncertainty that comes from Brexit lingering in the air for the next couple of years, is why savers all over the country are now looking into alternative options to grow their savings account, and earn higher returns over the coming few years.
There are quite a few investment options that can be quite lucrative in this type of economic environment, a very common choice being Fixed Income, and Property Investments.
While it is true that interest rates can’t fall much lower (though negative rates are a possibility) no-one can be sure where the pound will head from here. In these times of uncertainty, it is prudent to assemble a diverse spread of investments, encompassing different countries as well as different asset classes.
In times such as these, investors wishing to protect their wealth typically move out of high-risk assets, such as stocks, corporate debt and high-yield currencies, and into tangible assets, such as commodities and other non-index linked financial products. Although past performance is no guarantee of future results, bank-based or index-linked asset classes tend to perform poorer during times of financial downturn, while asset classes not dependent on stock market performance – gold, for example – have performed better.