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The Northern Ireland investment landscape in 2022

As some of Northern Ireland’s companies and individuals look out from the pandemic, Ulster Business speaks to the experts about the current financial landscape, options to grow your money, and the challenges ahead as the UK sees the highest inflation levels in four decades

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Jonathan Dobbin

Jonathan Dobbin

Ross Boyd

Ross Boyd

The investment market in 2022

The investment market in 2022

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Jonathan Dobbin

Jonathan Dobbin, head of UK regions, Julius Baer

Is cash king? Well in a portfolio context, at least, it is not. The current spike in inflation makes cash a suboptimal investment in terms of wealth preservation going forward – especially if you hold too much of it.

“Financial markets may seem fragile to some – Russia’s invasion of Ukraine hit the markets amid a global adjustment to monetary policy normalisation and almost every inflation print surprising to the upside. It is no surprise that investors’ cash allocations have spiked since the beginning of the year.

“Inflation matters – it is especially harsh on cash and cash-like investments. Thus, although markets do not exactly look like a safe haven now, we believe that investors with excess cash should remain disciplined and consider rebalancing towards investment solutions with potential to make a positive contribution to performance, while taking into consideration their individual investment horizon and overall risk appetite.

“Inflation in the US increased to 7.5% year-on-year in January – the highest inflation rate since 1982. It is clear we have all become inflation-watchers by now, as it was the fifth time in six months that inflation exceeded expectations. Our economists still believe that the inflation spike is transitory, and that readings will lower in the second half of the year. Nevertheless, we expect inflation for 2022 to average 4% in the US and 3.1% in the eurozone. These figures are by no means low and they show the true cost of holding cash in major currencies, as interest rates remain well below this year’s inflation rates.

“While these high inflation readings eat up cash in the short term, inflation has an even greater effect in the long run. In the US for example, goods and services that cost one dollar in 1975 would cost five dollars today.

“Pondering this phenomenon, cash-rich investors may ask themselves whether now is really a good time to invest, with many markets experiencing strong volatility amid geopolitical and interest-rate/inflation uncertainties.

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“Our strategists believe that the secular bull market that started following the great financial crisis is still intact. They do not expect a severe bear market as experienced in the first decade of this century, even as markets have been weak in the first months of this year. The market has cycles, there are good times and adverse times, and a balanced portfolio aims at protecting you against that by definition.

“The old adage comes to mind: ‘It’s not about timing the market, but about time in the market’. Investors often miss a great part of the market’s longer-term ascent because they are waiting for lower price levels to invest – an approach which hardly ever pays off. This does not mean that all the excess cash should be invested in one go, but rather that investors should have a deliberate strategy to put their excess cash to work commensurately with their return expectations and risk tolerance. This can be seen as part of an overall wealth planning strategy to preserve and grow one’s wealth over time.”

Ross Boyd, director at RB+ Chartered Accountants

“Although the current recessionary pressures driven by inflation of costs, staff shortages and increasing taxes may seem like a negative, they can also act as a catalyst for businesses to increase their wealth.

“Any change to the economic environment presents an opportunity for business owners and investors to be positive, step up and take action. Creating wealth is about getting a return on your investments and taking the right risks with these will drive growth and positive financial returns.

“To do this business owners and investors need a process. In today’s agile environment, this must be quick, easy and repeatable. At RB+ Chartered Accountants, we prefer the strategic ‘ready, aim and fire’ approach and would suggest that businesses implement this by assessing their investments and setting goals with clear actions, then executing them.

“Great business leaders reassess, and revise plans regularly to maintain growth momentum in ever changing times. With Covid and Brexit seemingly behind us, now is the time for local businesses to re-examine their business models and supply chains, and to explore green market opportunities. It is also a good time to consider investing in research and development.” 


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