Mike Coady Talks Strategic Asset Allocation for Expats

As an expat, building a solid financial plan goes beyond setting aside money each month. With inflation, fluctuating interest rates, and the complexities of different tax regimes, financial planning becomes a critical task—especially for those living abroad. In this context, understanding strategic asset allocation is key to maximizing long-term financial success.

Skybound Capital, the global asset management company, has recently published a thought-provoking piece authored by Karl Engelhard, CFA, and Alexander Engelhard, CFA, exploring how current macroeconomic trends, particularly inflation and interest rates, are impacting asset allocation. Drawing on these insights, alongside my own extensive experience in expat financial planning through Skybound Wealth Management, I aim to dive deeper into how these factors shape the financial future of expats and what steps can be taken to stay ahead.

Inflation and Interest Rates: The Dual Forces Shaping Your Financial Future

Historically, financial markets have been driven by two major forces: inflation and economic growth. When inflation is the dominant factor, equities and bonds—typically the foundation of most investment portfolios—tend to move in the same direction, reducing their diversification benefits. As noted by Skybound Capital, in the 1970s, high inflation led to poor performance in both asset classes, with only commodities offering a hedge.

Fast forward to today: inflation has once again at the forefront of market concerns. The pandemic-driven fiscal stimulus packages injected by governments have contributed to a rise in inflation, and global supply chains disruptions also worsened this issue. As a result, many central banks, including the US Federal Reserve and the European Central Bank shifted to a more aggressive stance on interest rates. For expats who often deal with multi-currency exposure, rising interest rates in one region can drastically impact the value of your savings and investments held in another.

For expats, this becomes particularly important when managing investments across jurisdictions. A robust asset allocation strategy that accounts for inflation and currency exposure is crucial for mitigating risks and maximizing long-term growth. At Skybound Wealth Management, we frequently advise our clients on diversifying across asset classes and geographies to help cushion the blow from inflationary pressures.

The Shift Away from "Easy Money"

One of the most significant changes in the financial environment is the end of the "easy money" era. As Skybound Capital emphasizes, the near-zero interest rates that dominated the post-2008 period incentivised investors to take on riskier assets in search of yield. With interest rates back above 0% for the first time in over a decade, cash is no longer yielding nothing.

For expats, this is a game-changer. Traditional investment strategies that once emphasised riskier assets such as high-growth equities and long-duration bonds may no longer be as attractive. With higher interest rates, bonds and cash now offer more competitive returns. As an expat, this creates a valuable opportunity to reassess your asset allocation strategy. For example, cash or shorter-duration bonds can now play a larger role in portfolios without the same penalty they once carried during the low-interest era.

At Skybound Wealth, we are leveraging Skybound Capital’s institutional expertise to reassess portfolio compositions for our clients. By integrating their insights on global market shifts, we ensure that expats are taking advantage of the current environment while maintaining a long-term vision for wealth preservation and growth.

Geopolitical Shifts: Deglobalization and Its Implications for Expats

One of the most fascinating aspects of Skybound Capital’s research is the emphasis on deglobalization as a key factor influencing asset allocation. Deglobalization refers to the reversal of trends that have seen economies becoming more interconnected over the past few decades. With geopolitical tensions rising and many countries looking inward to secure supply chains, we’re witnessing a shift toward regional self-reliance.

For expats, this creates both opportunities and risks. On the one hand, deglobalization can lead to inflationary pressures as countries invest in more expensive domestic solutions. On the other hand, it opens up new avenues for region-specific investments, especially in sectors like green energy and technology, where governments are pouring funds into innovation.

For those living and working abroad, understanding how these geopolitical factors affect different regions is critical. At Skybound Wealth Management, we work closely with Skybound Capital’s global team to ensure our clients are positioned to take advantage of regional opportunities while mitigating risks tied to deglobalization. Whether it’s adjusting portfolios to capture growth in emerging markets or restructuring assets to hedge against inflationary pressures in specific regions, strategic asset allocation plays a vital role in securing a prosperous financial future.

Tailored Asset Allocation for Expats

The key takeaway from Skybound Capital’s research is clear: today’s financial environment is more complex and interconnected than ever. For expats, this complexity requires a tailored approach to asset allocation, one that considers not just the typical factors like risk tolerance and time horizon but also the macroeconomic drivers such as inflation, interest rates, and regional trends.

At Skybound Wealth, our partnership with Skybound Capital allows us to deliver that expertise to our expat clients. By working together, we bring institutional knowledge to the individual investor, helping expats deal with the complexities of managing wealth across borders.

Final Thoughts: Leveraging Expertise for Long-Term Success

As expats, we face unique challenges in managing our wealth. From dealing with multiple currencies and tax regimes to understanding how global economic trends affect our portfolios, the complexities can often feel overwhelming. However, with the right advice and a strategic approach to asset allocation, expats can turn these challenges into opportunities.

At Skybound Wealth Management, we are proud to collaborate with Skybound Capital to ensure our clients have access to the latest insights and strategies. Whether you're looking to safeguard your wealth against inflation, adjust your portfolio in response to potential future reductions in interest rates, or explore new regional opportunities, we're here to help you across all of your global wealth management needs.

Together, we can ensure your financial future is secure—wherever your journey takes you.

You can read the full Skybound Capital piece on the link below:

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