Old Mutual’s Odendaal on the rolling rate hikes, how to invest during conflict

As the global financial landscape continues to shift, investors are faced with a challenging environment marked by increasing inflation, geopolitical tensions, and uncertainty surrounding monetary policies. Izak Odendaal, Investment Strategist at Old Mutual Wealth, sheds light on the implications of the conflict between Russia and Ukraine on the already high global inflation rates. The conflict has exacerbated existing challenges such as supply chain disruptions, rising commodity prices, and impending interest rate hikes by central banks in developed and emerging markets. Central banks now find themselves in a delicate balancing act between addressing inflationary pressures and supporting economic growth. The recent stance of the US Federal Reserve and the European Central Bank indicates a heightened focus on inflation concerns over growth prospects. The conflict's impact on the global financial markets is further compounded by the reallocation of funds from China following sanctions against Russia. Some experts speculate that these events could signal a shift in the current globalization paradigm, affecting investment patterns and economic relations. While the immediate consequences remain uncertain, investors are advised to closely monitor developments in China and anticipate potential long-term implications. Considering investment strategies in the face of bond market volatility, Odendaal suggests that South African investors may benefit from the relatively stable performance of local bonds compared to the turbulence in global bond markets. South African bond yields remain attractive, providing a sense of security amidst market fluctuations. Despite the challenges facing the bond market, South African equities have shown resilience, particularly in response to rising commodity prices. Odendaal recommends a cautious approach to portfolio management, urging investors to consider reallocating risk exposure to mitigate potential market uncertainties. Although the equities market may present short-term opportunities, the current volatile environment calls for a strategic approach to asset allocation. Odendaal advises investors to exercise prudence and explore opportunities to adjust their equity exposure accordingly. The year ahead is projected to be characterized by market volatility, underscoring the importance of maintaining liquidity and considering the stability offered by cash holdings. South African bonds continue to be a compelling option for local investors seeking stable returns amidst market fluctuations. In navigating the evolving financial landscape, investors are encouraged to adopt a proactive approach informed by market dynamics and emerging trends.