Asset manager Abrdn recommends investing in high-dividend stocks to combat global inflation, noting they can grow even in volatile market conditions.
Josh Duitz, deputy head of global equities at the firm formerly known as Aberdeen Asset Management, said inflation is approaching its peak. Energy prices have started to decline and more workers have returned to work, both of which could reduce inflationary pressures on the global economy.
As the US holds midterm elections in mid-November, Mr Duitz said statistics dating back to 1946 showed the stock market is unlikely to decline in the following 12 months. Along with falling inflation, he said it is unlikely the global economy would fall into recession.
Regarding concerns that skyrocketing inflation would dampen the global economy, Mr Duitz said there was a 50/50 chance.
"I believe in the end, rising employment rates will bring the situation back to normal. Coupled with a slight drop in energy prices, it could prevent a recession," he said.
Mr Duitz said funds focused on dividend stocks are recommended because they can generate consistent returns, such as the Aberdeen Standard Global Dynamic Dividend Fund, a foreign investment fund that invests in growth and value stocks around the world. The master fund provides an opportunity to gain a return from monthly income streams.
The fund generated continuous returns even during the pandemic, he said, adding that a 5% return on investment in dividend stocks is a reasonable level.
"In Europe, we will give significant weight to the German stock market and in businesses related to energy utilities or power plants, as well as consumer goods with good cashflow," said Mr Duitz.
"Investing in a dividend fund is a good choice because the assets of the fund earn consistently good income even amid inflation. The companies in this fund have the ability to raise prices and pay dividends during inflation."
He said Abrdn has a team of more than 120 people around the world to analyse and choose the best stocks for investment.
They focus on bourses that are likely to improve for 10 consecutive years and be a long-term investment opportunity.
"When comparing high-growth stocks with the ability to pay dividends against value stocks, the latter obviously have more value. But in the portfolio of this fund, we will focus more on cashflow, especially during the Covid period, and we don't look at macros much, but rather focus more on the fundamentals of the company," said Mr Duitz.