Nigel Green, the CEO of deVere Group, the independent financial advisory, asset management, and fintech organisation, has forecasted a swifter decline in inflation in major economies than many analysts anticipate. He also predicts a concurrent reduction in interest rates within the upcoming year.
These insights come amid growing global signs pointing to the peak of inflation. Green believes that the economies of the US, UK, and EU are set for a rapid fall in inflation in the coming 12 months. He identified three central reasons underpinning this prediction.
Firstly, he noted a stagnation in real wages. Even with rising inflation, employers seem reluctant to grant significant salary increases, a move likely to curb wage inflation. Secondly, the monetary policies’ time lag is more protracted than one might expect. The full ramifications of rate adjustments often take around 18 months to fully manifest in the economy. Given this context, Green warns of a further tightening in financial conditions in the near term. Lastly, while many economies might dodge a severe recession, the overall economic growth is anticipated to remain lacklustre for an unforeseen period.
Green’s predictions extend to central banks, as he anticipates entities like the Federal Reserve, the Bank of England, and the ECB will soon initiate a series of interest rate cuts.
Green said: “In a climate of escalating costs, investors’ focus should naturally gravitate towards understanding a company’s, and by extension a sector’s, capability to sustain margins. A keen understanding of margins can reveal insights into a firm’s cost management efficiency and its competitive standing within its industry. Moreover, margins can also reflect a corporation’s capacity to channel investments into growth avenues or disburse dividends to its shareholders.”
Concluding his insights, Green added: “Given the prospective quicker-than-anticipated deflation, now is the time for investors to recalibrate their strategies to harness emerging opportunities and counter potential risks.”
