CONSUMERS

How Currency Wars Look Set to Impact Wealth

by

James Lawson

|

This is the featured image caption
Credit: This is the featured image credit

With the prospect of many nations mobilising for a currency war, James Lawson, director at Ledbury Research, considers the impact on the wealthy

Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.

PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.

In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”

The Fondation Cartier pour l’Art Contemparain building in Paris

With the prospect of many nations mobilising for a currency war, James Lawson, director at Ledbury Research, considers the impact on the wealthy

The jury is out regarding the extent of currency wars. On the one hand, many experts believe exchange rates are being deliberately manipulated by governments in an attempt to improve international competitiveness.

Others contend that the exchange rate movements we are seeing weren’t explicitly targeted, but simply the result of central banks rightfully pursuing their mandates to boost domestic demand.

Whatever their motivation, the monetary and fiscal policies being followed in the US, Europe and Japan are likely to lead to big changes in exchange rates over the coming years. The most extreme recent example is the Yen – down almost 20% against the dollar in the last three months alone. Big changes in currencies will have a big change in wealth.

“ The fiscal policies being followed in the US, Europe & Japan are likely to lead to big changes in exchange rates ”

One potential outcome of this shifting landscape is rising stock markets and more general asset price appreciation. The Nikkei index, for example, is up 30% in the last three months. However, left unchecked, these policies have the potential to trigger market instability, capital flight and inflationary bubbles. These will threaten wealth accumulation prospects.

This delicate trade-off will bring the issue of how and where wealth is held sharply into focus, provoking a reassessment of asset allocation and product preferences.

At a basic level, offerings that insulate or hedge currency changes, such as hedged share classes and ETFs, will prove popular. A more sophisticated approach may involve recommending foreign currency financing options, such as Yen denominated business loans.

“ Tangible assets may also be favoured as they can easily be sold in a number of currencies ”

Tangible assets may also be favoured as they can easily be sold in a number of currencies. The fact that classic cars (395%), rare coins (248%), stamps (216%) and fine art (199%) have all returned significant amounts over the past 10 years will not have gone unnoticed by wealthy investors. Indeed, 64% of China’s millionaires are already amassing high-end collectables (Hurun).

Typically, UHNW investors have complex webs of wealth spread around the world and across asset classes. For these most sophisticated clients, they may start to look at the world with a bespoke, single currency.

Value changes across their portfolio would be converted by the wealth manager or family office and conveyed to the client as simple changes in their single currency. This would enable these notoriously time poor individuals to track their finances across the world at a glance, without having to worry about numerous currency fluctuations.

Service providers, both inside and outside of finance, who get on the front foot with regard to the changing macro picture and display innovative, thoughtful and personalised solutions will steal a march on the competition.

To further investigate wealth & affluence on Luxury Society, we invite your to explore the related materials as follows:

Key Insights from The 2013 Wealth Report by Knight Frank
The Rich Just Keep Getting Richer
Why Luxury Brands Should Target the Top 1%

James Lawson

Director

Bio Not Found

CONSUMERS

How Currency Wars Look Set to Impact Wealth

by

James Lawson

|

This is the featured image caption
Credit : This is the featured image credit

With the prospect of many nations mobilising for a currency war, James Lawson, director at Ledbury Research, considers the impact on the wealthy

Over the last decade, collaborations between luxury brands and contemporary artists have gone beyond mere artistic partnerships towards a new kind of luxury branding.

PARIS – Art and fashion have always developed side by side, for fashion, like art, often gives visual expression to the cultural zeitgeist. During the 1920s, Salvador Dalí created dresses for Coco Chanel and Elsa Schiapparelli. In the 1930s, Ferragamo’s shoes commissioned designs for advertisements from Futurist painter Lucio Venna, while Gianni Versace commissioned works from artists such as Alighiero Boetti and Roy Lichtenstein for the launch of his collections. Yves Saint Laurent’s vast art collection, recently auctioned at Christie’s in Paris, testified to his great love of art and revealed the influence of a variety of artists on his own designs.

In the 1980s, relationships between luxury brands and artists were advanced when Alain Dominique Perrin created the Fondation Cartier. In the Fondation Cartier pour l’Art Contemporain, a book marking the foundation’s 20th anniversary, Perrin says he makes “a connection between all the different sorts of arts, and luxury goods are a kind of art. Luxury goods are handicrafts of art, applied art.”

The Fondation Cartier pour l’Art Contemparain building in Paris

With the prospect of many nations mobilising for a currency war, James Lawson, director at Ledbury Research, considers the impact on the wealthy

The jury is out regarding the extent of currency wars. On the one hand, many experts believe exchange rates are being deliberately manipulated by governments in an attempt to improve international competitiveness.

Others contend that the exchange rate movements we are seeing weren’t explicitly targeted, but simply the result of central banks rightfully pursuing their mandates to boost domestic demand.

Whatever their motivation, the monetary and fiscal policies being followed in the US, Europe and Japan are likely to lead to big changes in exchange rates over the coming years. The most extreme recent example is the Yen – down almost 20% against the dollar in the last three months alone. Big changes in currencies will have a big change in wealth.

“ The fiscal policies being followed in the US, Europe & Japan are likely to lead to big changes in exchange rates ”

One potential outcome of this shifting landscape is rising stock markets and more general asset price appreciation. The Nikkei index, for example, is up 30% in the last three months. However, left unchecked, these policies have the potential to trigger market instability, capital flight and inflationary bubbles. These will threaten wealth accumulation prospects.

This delicate trade-off will bring the issue of how and where wealth is held sharply into focus, provoking a reassessment of asset allocation and product preferences.

At a basic level, offerings that insulate or hedge currency changes, such as hedged share classes and ETFs, will prove popular. A more sophisticated approach may involve recommending foreign currency financing options, such as Yen denominated business loans.

“ Tangible assets may also be favoured as they can easily be sold in a number of currencies ”

Tangible assets may also be favoured as they can easily be sold in a number of currencies. The fact that classic cars (395%), rare coins (248%), stamps (216%) and fine art (199%) have all returned significant amounts over the past 10 years will not have gone unnoticed by wealthy investors. Indeed, 64% of China’s millionaires are already amassing high-end collectables (Hurun).

Typically, UHNW investors have complex webs of wealth spread around the world and across asset classes. For these most sophisticated clients, they may start to look at the world with a bespoke, single currency.

Value changes across their portfolio would be converted by the wealth manager or family office and conveyed to the client as simple changes in their single currency. This would enable these notoriously time poor individuals to track their finances across the world at a glance, without having to worry about numerous currency fluctuations.

Service providers, both inside and outside of finance, who get on the front foot with regard to the changing macro picture and display innovative, thoughtful and personalised solutions will steal a march on the competition.

To further investigate wealth & affluence on Luxury Society, we invite your to explore the related materials as follows:

Key Insights from The 2013 Wealth Report by Knight Frank
The Rich Just Keep Getting Richer
Why Luxury Brands Should Target the Top 1%

James Lawson

Director

Bio Not Found

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