Rothschild Wealth Management holds assets such as equities, commodities, gold and real estate to give some protection against inflation while central banks continue to print money, while it is cool on cash and government debt, the firm said in a recent investment update.

“Our main scenario is for more of the same: low interest rates and subdued growth, as politicians in the west muddle through the debt crisis. While we expect inflation to stay in a 2 per cent to 3 per cent range over the next few years, we believe much higher inflation is a greater risk than a deflationary slump,” Dirk Wiedmann, head of investments, said in a note.

The firm has, meanwhile, been recently shortlisted for an award under the WealthBriefing Awards 2013, to be announced on 2 May this year in London.

Among its favourite asset areas are shares in leading global businesses that Rothschild argues are “fairly valued and paying good dividends”. It likes companies with “dominant brands, healthy balance sheets and robust cash flows”; such firms can flourish, even in a world of low growth, it said.

Among currencies, the firm likes the Norwegian krone, the Canadian and Singapore dollars, saying these currencies should remain firm in the next few years as a result of strong economies and robust government finances. It added, that gold is a global ‘hard’ currency.

Emerging

Rothschild Wealth Management also likes emerging market assets, Wiedmann said, pointing to different ways of gaining exposure, whether via local bond markets or holding global businesses that earn a large chunk of revenues in such markets.

After being in the doldrums for years, the wealth manager is positive on Japanese equities, saying they are cheap on various valuations, such as a price-to-book ratio. “In our view, a weaker yen and negative real interest rates could trigger an upward re-rating of Japanese equities over the next 12 to 18 months,” it said.

The firm added that the trend in economic data has been relatively reassuring in recent times, with signs of stronger industrial output around the world; in the US, house prices are edging higher, while manufacturing and services are expanding. On the negative side, the $85 billion in departmental spending cuts that took effect in March are expected to cut up to 1.5 per cent from the country’s gross domestic product this year.

Turning to China, Rothschild Wealth Management said the world’s second largest economy is showing more solid signs of recovery, bolstered by exports and resilient equity and real estate markets. It added that average inflation in the region appears to have bottomed at around 3 per cent.