- Inflation beast spells risk for bonds
- Gold remains a useful diversifier
Post-mortems for the vanquished and serious reflection for the badly mauled – 2024 was a year when many incumbent governments faced a reckoning at the polls. Whether ruling parties styled themselves as left or right of centre, if there was one unifying theme it was the cost-of-living crisis stoking popular discontent.
The devastating impact of inflation is also a two-pronged headache for investors. Ultimately, the slow march of rising prices destroys the value of cash, a fact that provides the rationale for accepting investment risk (which has upside) to out-run the guaranteed loss if you do nothing. In the short-term, however, the volatility in financial markets caused by interest rate expectations vacillating on the shifting sands of inflation data heightens the risk of nasty mark-to-market falls in portfolio value.
