HSBC Private Bank has cut its outlook on equities due to concerns about rising inflation pressures, which it said will hit economic growth and lead to developments such as weaker consumer spending in emerging market economies.

“Due to our moderated growth outlook prompted by rising inflation and the positive performance in equities over the last month, we have reduced our equity rating from positive to neutral. However, our longer term view has not changed dramatically,” the bank said in a regular strategy note.

For fixed income assets, HSBC Private Bank said inflation worries would hit this sector. This has led the bank to reduce its view to “negative” from “neutral”.

“Our current asset allocation approach is founded on our outlook for persistent inflationary pressures in the global economy. Under these circumstances, we believe it is more prudent to focus our views over a short term time frame,” it said.

“We believe investors will find the most rewarding opportunities in hedge funds and commodities while a healthy position in cash should limit volatility. Our view towards commodities as a whole remains positive, while our ranking of different commodity complexes also remains unchanged,” it said.

HSBC Private Bank said it expects economic weakness in the Eurozone and UK will quickly remind investors of the vulnerabilities of euro and sterling, helping to reinforce prospects for a rise in the dollar.