Although latest inflation figures have brought some much needed relief, there may not be any realistic chance of interest rates rising until 2014 – meaning investors will need to seek real assets for inflation protection, according to Bestinvest.
The consumer prices index (CPI) fell from 3.5 per cent in March to three per cent in April as higher sterling and weaker input prices helped offset duty increases in tobacco and alcohol.
Adrian Lowcock, senior investment adviser at Bestinvest, said that with index linked bonds continuing to offer negative real yields and other asset classes such as commercial property looking expensive, investors should continue to look at equities as a sound way of achieving long term inflation protection.
“Recent equity falls have left many well-funded, profitable global companies trading on low valuations and high yields,” he said.
“We continue to view those asset classes linked to the corporate sectors as being some of the most attractive currently available.”
Mr Lowcock’s recommendations include Threadneedle UK Equity Income at 4.2 per cent and Royal London Corporate Bond Trust at five per cent.