The messages emerging from central bank meetings last week make sober reading for investors. The Bank of England warned of the UK economy sliding into a recession this year as it raised interest rates in a bid to stem the pace of rising prices, with inflation now forecast to hit 10 per cent by the autumn. When it came to future rate rises, the message from Andrew Bailey, the Bank’s governor, was more cautious than the market had expected. But the suggestion of lower growth and persistent inflation knocked the pound and renewed stagflation fears.
Across the pond, the Federal Reserve (Fed) implemented its first half-point interest rate rise since 2000, with its chair Jay Powell trying to reassure the market by saying there was a “good chance” of a “soft landing”. However, just the day before his predecessor Janet Yellen, now treasury secretary, said the Fed would need to be “skillful and also lucky” to rein in inflation without causing a recession. The growth-heavy Nasdaq index has fallen by a quarter since the start of the year.
This precarious economic outlook raises the question of how to allocate investments. If you don’t want to take a hands-on approach, you can always turn to multi-asset funds and let a fund manager make asset allocation decisions for you. And even if you do rely more heavily on your own skills, it might be instructive to have a look at these funds to help you think about your own asset allocation.