Inflation is making a comeback.
Despite central banks easing interest rates to counteract historic highs, economic and political shifts are setting the stage for a fresh wave of inflationary pressures.
Nigel Green, CEO of deVere Group, warns that the erosion of cash’s purchasing power is not just a possibility—it’s an imminent threat. “Inflation isn’t a hypothetical concern; it’s a certainty in today’s economic climate,” he says. For investors sitting on unprotected cash, the outlook is stark: real value will diminish unless proactive measures are taken.
Political shifts fueling inflation
Green highlights three major drivers of renewed inflation:
- Trump’s return in the US: His agenda could spur significant spending on infrastructure and the reintroduction of tariffs, particularly on Chinese imports. This would boost prices across sectors, directly affecting consumers and global markets.
- Labour’s mandate in the UK: Increased public spending on housing, green energy, and public services could stimulate economic growth but risk inflation if wage rises and spending outpace productivity gains.
- Middle Eastern tensions: Geopolitical instability and potential disruptions to oil supply chains are expected to raise energy, transportation, and manufacturing costs globally.
The dangers of cash
Holding large cash reserves may seem safe, but Green emphasises its vulnerability in an inflationary environment. “Cash is not the safe haven people believe it to be. Inflation erodes purchasing power, making cash a certain way to lose value,” he cautions.
Why property is a smart defence
To counteract inflation, Green advises pivoting to assets that historically perform well during inflationary periods. Real estate tops the list as a reliable hedge against rising prices.
- Consistent demand: Residential and commercial properties often see increased demand during inflationary periods as tangible assets hold intrinsic value.
- Rental income growth: Property owners can adjust rents in line with inflation, maintaining returns even as costs rise.
- Capital appreciation: Inflation typically drives up property values, making it an ideal long-term investment.
Equities in energy, infrastructure, and green tech also present opportunities, particularly with policy agendas in the US and UK prioritising these sectors. Inflation-linked bonds and commodities further diversify portfolios against inflation risks.
Timing is crucial
“Sitting on cash in this climate is a losing strategy,” says Green. “Investors need to act now to protect and grow their wealth with inflation-resistant assets.”
For those seeking stability and growth amidst uncertainty, property investment remains one of the most effective shields against inflation’s corrosive impact.