It has been a punishing six months for investors.
Markets have been dealt blows from the Russia-Ukraine war, rising interest rates and rising inflation. The risk of a recession is back on the radar and COVID 19 uncertainties linger.
Experts said that the coast is not clear as it is going to be in the second half of 2022.
As policymakers struggle to get inflation under control, we're not out of the woods, said IG market strategist Yeap Jun Rong, noting higher recession risks in the United States.
Market sentiments are expected to remain vulnerable, with catalysts for further selling coming from slowing economic indicators over the coming months. It is not a bad idea to have enough money to be a buffer against unexpected expenses or loss of income in uncertain times. CGS-CIMB remisier Ernest Lim said that having some cash on the sidelines allows one to be ready for opportunities.
Inflation will erode the value of cash savings in the long run. The experts said it might be better to stay invested because of the stomach-churning volatility.
The key is to be selective, said Hou Wey Fook, DBS Bank's chief investment officer. He told CNA that to avoid an erosion of spending power and tackle the challenge of rising prices, one should invest in quality, income assets.
He added that investors should avoid excessive leverage because of the rising interest rate environment.
UOB Asset Management senior director of multi-asset strategy Anthony Joseph Raza said markets will be under pressure in the coming months due to inflation risks, but there are still positives for mid to long-term investments. These pockets of opportunity may help investors to guard against higher inflation and slowing economic growth. Commodity classes have gained a lot this year, and they have raked in some significant gains.
Mr Hou said that gold is an excellent store of value and the inflation hedge is an excellent store of value.
Gold is a safe-haven asset and a luxury good with its dual appeal as a safe-haven asset and luxury good. It sees demand during good and bad times. The precious metal has shown an inverse correlation with real rates, with gold prices going up when inflation is high and negative rates threaten to erode the value of cash holdings, he explained.
There are several ways to gain exposure to gold such as buying physical gold bars or investing in gold exchange-traded funds, ETFs or managed funds.
Mr Hou prefers the latter, noting that ETFs and managed funds are more diversified and allow for less capital commitments. They also remove the logistical costs of owning physical gold.