Harold Strydom told Peregrine Wealth’s annual investment seminar that while post-Covid global markets were experiencing incredible growth, the current level is not sustainable.
While many businesses exited the pandemic stronger than they entered, the growth that some are experiencing is expected to moderate this year, he said.
‘While we expect the pace of economic growth to drop, we do not expect the global economy to dip into a recession,’ he said.
‘The US is more insulated from the Russia-Ukraine war, while China is already stimulating their economy to reach their growth target. The outlook for Europe is a lot more uncertain, with energy insecurity a major risk.’
Covid and Russian sanctions have caused some market dislocations, he said. Covid lockdowns had initially caused a sudden drop in demand for oil, leading to a significant price fall by April 2020, which was the opposite to the current situation, with many countries banning Russian oil imports.
‘The oil price is spiking. It will take time for alternative supply to come to market and prices are expected to remain elevated,’ Mr Strydom said.
‘The problem the equity market faces is that this spike in commodity prices is occurring at a time when inflation has already reached a 30-40 year high. Central banks are forced to hike interest rates to bring inflation under control.
‘The key question is whether businesses and consumers will be able to handle higher interest rates and higher energy and commodity prices at the same time. Due to a healthy starting point, we believe they will be able to, and by taking a medium-term view, equities are therefore attractive.’
Hennie Esterhuizen, managing director of Peregrine Wealth, said that more than ever, Guernsey was operating in an unpredictable world.
‘As the market develops during these uncertain times, Guernsey’s financial industry has an opportunity to showcase itself as a flexible provider of more-bespoke wealth solutions,’ she said.