Part of the UK banking group HSBC, the private bank said in a strategy note that it favoured commodities, especially agricultural goods, and the US dollar, which it says should gain ground against the euro and the Japanese yen.

“Our overall equity view is neutral, with a more negative short-term view given the continued downward pressure resulting from negative newsflow,” HSBC Private Bank said. It continued: “Whilst we expect inflation will last longer than our short-term view, careful selection of stock in inflation-resistant sectors should pay dividends, despite the elevated risk.”

Explaining its negative stance on bonds overall, the bank said that market expectations have shifted towards a rise, rather than a cut, by the Federal Reserve because of worries about inflation. The shift has led to a “dramatic” flattening of the US bond market curve, as short-term bond yields have risen relative to longer-dated maturities.

“We believe investors will find the most rewarding positions in hedge funds and commodities whilst a healthy position in cash should limit volatility,” the note added.