Diversification is the key

Friday 05 December 2014

Investors must ensure that they maintain a fully diversified portfolio whilst the global economy maintains a high level of risk and volatility.

The advice came from Bill O’Neill, Head of Chief Investment Office Research UK at UBS Wealth Management when he recently addressed a seminar for financial services professionals and private clients.

He said it was the normalisation of interest rates that would bring greater risk as the cost of lending increases, however, those risks are not shared equally around the world. In his opinion, the US and UK economies, which have reduced government borrowing but are now reliant on consumer spending, are likely to have different reactions to the EU and Japanese economies which are struggling with both low growth and low inflation.

He said: “We do think global growth will continue next year, led by the US where we expect growth to be about 3%. Europe will also grow but its rate will be feeble.

Europe may have economic problems but he didn’t feel that these would threaten the Euro.

“I don’t think there’s an existential threat to the Euro and we think that economies in the Eurozone should pick up,” he explained.

Closer to home, things are looking better in the UK, where wages are beginning to recover.

“We’re beginning to see an important pick up in wages,” he said before predicting that savers would have to wait until “after the election for an interest rate rise.”

However, alongside wages, he also expects continued robust growth in employment through to the end of the year.