Seeking growth in a downturn

Aug 25 2022 | 2 min

The economic headlines are full of doom and gloom in many countries. The Russia-Ukraine conflict continues to put pressure on the global supply of oil while the higher cost of living is threatening the post-pandemic economic recovery.

Meanwhile, higher energy prices direct large amounts of capital to the Gulf Cooperation Council (GCC) states, where economic growth is linked largely to the price of hydrocarbons. This increase in wealth represents a major boost for the region’s economy and investment community.

What does this mean for high-net-worth individuals seeking opportunities in a looming bear market?

The booming Gulf

The International Monetary Fund (IMF) predicted recently that market conditions could boost oil revenues in the Middle East as a whole could by $1.3 trillion, leading to a doubling of economic growth in the GCC from 2.7% in 2021 to 6.4% this year.

Along with its significant share of global oil and gas exports, GCC also hosts some of the world’s largest sovereign wealth funds (SWFs), including Saudi Arabia’s Public Investment Fund (PIF) and the Abu Dhabi Investment Authority.

These funds have been active during previous major downturns, such as the Global Financial Crisis of 2008. In Q2 this year, Saudi’s PIF invested more than $7.5 billion in the US stock market, taking advantage of depressed prices for leading stocks such as Amazon, PayPal and BlackRock.

Heightened investor interest

Various reports have also noted the increasing popularity of the GCC as a destination for high and ultra-high net worth individuals.[1]

This is particularly true of the UAE, where 4,000 millionaires (on a net basis) are expected to move this year. Bahrain is also forecast to grow in popularity due to its pragmatic approach to regulating foreign ownership of real estate and industrial assets.[2]

Meanwhile, as investors in the Middle East and North Africa are seeking to diversify their portfolio globally, many international wealth management firms are boosting their presence in the region.[3]

What this means for investors

A changing environment creates risk and opportunity. The main risk arises from continuing a strategy based on assumptions that no longer apply. Opportunity arises from doing the opposite.

The investments by SWFs show how investors can capitalize on opportunities in a downturn. Undervalued stocks are always a good investment and easier to identify during periods of investor retreat.

Longer-term, investing in growth sectors is key to portfolio growth.

Healthcare, clean energy and technology overall are solid longer-term bets, as their continued relevance means that governments are likely to keep funding them despite—and even because of—future crises.

What this means for you

The last half-year has been difficult for investors of all sizes. Many retirement plans were built on assumptions that have become too optimistic. Unless adjusted, some may need to continue working longer than planned, or adjust their lifestyle during retirement.

But there is always opportunity also. With the right professional, you can review your portfolio allocation and rebalance it towards higher-growth opportunities.

Conclusion

TFO has a history of helping investors navigate the constantly changing market landscape, based on deep professional expertise and a thorough understanding of individual goals. Learn how we can help you grow and preserve your wealth. Follow the link below to schedule a call with one of our financial advisors.

 

 

[1] Consultancy-me.com - https://www.consultancy-me.com/news/3529/number-of-ultra-rich-in-middle-east-to-boom-in-coming-years
[2] Henley & Partners - https://www.henleyglobal.com/publications/henley-global-citizens-report/2022-q2/regional-insights/investment-migration-insights-middle-east
[3] Arabian Business - https://www.arabianbusiness.com/money/wealth/wealth-managers-expect-asset-management-industry-to-hit-2-trillion-faster-than-expected

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