How investors can capitalize on tough global outlook

The financial markets are currently presenting a challenge to investors as indicated by Standard Chartered Bank's second-half global markets outlook report. The report highlights that leading indicators of economic growth, especially in the United States, are painting a less optimistic picture. Moreover, most major central banks are more concerned about elevated inflation levels than weak growth indicators. CNBC Africa recently interviewed Paul Njoki, the Head of affluent banking and Wealth Management at Standard Chartered Bank, to shed light on the implications of these challenges for investors. During the interview, Njoki discussed various investment scenarios and strategies to help investors navigate the uncertain market conditions. As the report indicates, there are two primary scenarios that investors need to consider: one where the US economy goes into recession, causing stress across different markets, and another where a softer landing is experienced. In the latter scenario, investors are faced with the dilemma of whether to invest in bonds during a recession or continue capitalizing on the current rally in the tech and growth sectors. Njoki emphasized the importance of helping investors navigate these options to make informed decisions. The interview also touched on the risks associated with inflationary pressures and the challenges posed by dollar liquidity issues in emerging markets. According to Njoki, inflation is gradually tapering off in the US, but remains a significant challenge in emerging markets like Africa. Dollar liquidity constraints are further exacerbated by the Federal Reserve's interest rate hikes, encouraging investors to keep their funds in US Treasuries. However, Njoki remains optimistic that as inflation subsides and the possibility of a recession looms, the dollar will weaken, prompting the Fed to adjust interest rates to stimulate growth. To address these risks, Njoki recommends investing in high-grade investment bonds to hedge against market uncertainties and diversifying portfolios across multiple sectors. He suggests allocating to tech, healthcare, and defensive sectors while leaning towards the Asian markets, including Japan and India, to leverage investment opportunities. Additionally, Njoki advises African investors to adopt a calm approach and consider investing in dollar-based portfolios, government bonds, and select Asian markets for diversification. He emphasizes the importance of strategic allocation to mitigate risks and capitalize on attractive returns in emerging markets. Regarding investment opportunities in Africa, Njoki highlights the potential in the bond markets, especially following last year's market downturn, which has resulted in attractive yields. He encourages investors to adopt a broad-based allocation strategy to navigate volatile market conditions successfully. The interview concluded with a discussion on re-engineering global supply chains, presenting opportunities for East African countries to attract investment from Western economies seeking new sources of energy and commodities. Njoki emphasized the need for infrastructure and energy investments in Africa to facilitate cost-effective manufacturing and capitalize on the continent's youthful population. The interview provided valuable insights into navigating the current global market challenges and capitalizing on emerging opportunities, highlighting the importance of strategic investment decisions and a diversified portfolio approach.