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Monday, 23 September 2019

The specter of a global recession makes the very wealthy extra risk averse

The specter of a global recession makes the very wealthy extra risk-averse: As the Bank of America's global fund manager survey estimates the risk of recession as being at its highest since 2009, ultra high-net worth investors are adopting a more defensive stance in a bid to protect their assets, according to Business Insider. With yields on short-term US bonds eclipsing those of long-term bonds in August for the first time since 2007, the very wealthy are seeing less value in the bond market, and seeking to reduce their exposure to risks associated with interest rate and market fluctuations. Instead, they are increasingly stockpiling cash, hoping to maintain liquidity. Those who don’t want to shift away from equities altogether are gravitating towards index and low volatility ETFs, as well as dividend-paying stocks with solid balance sheets. And gold is outperforming both stocks and bonds, seeing its value soar from USD 1.2k to over USD 1.5k per ounce in the space of a year.

The advice across the board? Don’t get too emotional. Conventional asset protection wisdom stresses the value of a diversified portfolio, with a mixture of stocks and bonds tending to offer stability even in a volatile climate. But wealth managers are also urging their clients not to underestimate the value of time. The markets are jittery at the moment, but short-term swings appear very different when looked at in the long-term. And sometimes it’s worth just staying the course and sticking to a long-term investment plan, rather than seeking to anticipate every market development — an investment approach that, interestingly, reflects the philosophy articulated by EGX chairman Mohamed Farid in a conversation we held back in February.

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