The current financial environment is being shaped by three key forces:
- Interest rates remaining higher for longer
- Ongoing inflationary pressures
- Increased geopolitical and economic uncertainty
Interest rates are expected to remain higher as the US – Iran war and subsequent closing of the Strait of Hormuz means that energy prices are increasing. Additionally, so is the cost of fertiliser, which will have a knock-on effect on the increased cost of food moving forwards.
Supply shocks disrupt production, reduce overall supply and lead to inflation. Increased inflationary pressures lead to central banks keeping interest rates higher, to combat that inflation.
The increased uncertainty surrounding the geopolitical tensions are also having an impact on the volatility shown in markets and bond markets.
Together, these issues are creating both challenges and opportunities for investors. In times like these, it’s easy to focus on headlines – but effective financial planning looks beyond them. The role of an adviser is not to predict short-term market movements, but to ensure that clients remain aligned with their long-term objectives, regardless of external conditions.
Reviewing risk exposure, maintaining diversification, and staying invested are often more impactful than trying to time the market.
