Higher allocations to cash may be tempting and could be beneficial, to take advantage of the buying opportunities that a period of stagflation/weakness in markets eventually creates with a long-term perspective. 

However, while nominal returns on cash and equivalents are rising and will continue to do so, they are still expected to remain negative in real terms.

But much has already been discounted and we are likely close to peak inflation; the change in direction will be an important shift for markets.

Also, unlike the GFC, this cycle is not driven by the need for financial deleveraging, and balance sheets of households, businesses and banks are generally strong. This will help to minimise the slowdown ahead and gives the scope for economies to bounce back quite quickly.

At the same time, valuation opportunities have opened up for longer-term investors. With careful diversification, and asset allocation designed for the environment ahead rather than that of the past decade, we believe it is important to ride out any short-term volatility and take advantage of setbacks in markets as the cycle evolves.

Andrew Hardy is investment director at Momentum Global Investment Management