George Herman, chief investment officer at Peregrine Wealth, told a local audience at an investment seminar of the prospects for the rest of the year, which, he said, was likely to be ‘bumpy’.
He said that the recovery from the Covid pandemic was breaking down supply chains and trading partnerships in favour of ‘supporting local’.
‘Deglobalisation is taking place in front of our eyes. We’re now looking at what we can purchase in our own postcode and not the cheapest option from across the world.’
The war in Ukraine has been a main driver of inflation, with grain and energy supply issues causing significant price increases, particularly in Europe.
As central banks tackle inflation with tighter monetary policy, global growth was suffering, he said.
‘For the past 40 years, central banks haven’t had many issues controlling inflation rates,’ Mr Herman said.
‘However, almost overnight, rates increased from 2% to 8%, meaning the issue evolved from mere inflation to a cost-of-living crisis.
‘Unfortunately, central banks only have one tool to do this – interest rates. But this tool isn’t very direct and doesn’t reach the problem at hand, so central banks are having to find a fine balance.’
He explained that the post-Covid rate of global growth was not sustainable and signs of a slowdown were now being seen.
‘The majority of early indicator tools and figures are flashing warnings about economic growth slowing down and a potential recession in the coming months.’
A very buoyant labour market did not necessarily point to continued economic strength in the future, he said.
‘Looking at the unemployment rate and saying the global economy isn’t slowing is like looking at your feet to try and predict the weather – you’re looking the wrong way. Employment is always a lagging indicator.’
Bond markets were painting a negative picture of the economic outlook, he said, implying that a recession was on the way.
In contrast, resurgent equity markets suggest a more positive scenario.
Mr Herman warned, however, that much of his year’s equity performance has been concentrated in a small number of technology shares, following the public emergence of ChatGPT and other large language models.
‘Do not confuse the uplift caused by AI with long-term growth. We’re seeing a rebalance between technology this year and last year’s saviours – energy