With UK inflation still above the Bank of England’s 2% target, it’s understandable that investors are asking whether they should take less risk. The latest Office for National Statistics release shows CPI inflation at 2.8% in the 12 months to May 2026, unchanged from April, while CPIH, which includes owner occupiers’ housing costs was 3.0%, also unchanged from April. The Bank of England has also maintained Bank Rate at 3.75%, noting that inflation has fallen but is expected to rise again later this year.
The important point is that the inflation picture is mixed. According to the ONS, transport made the largest upward contribution to the monthly change in both CPIH and CPI annual rates, while food and non-alcoholic beverages made the largest, partially offsetting, downward contribution. Services inflation also rose, with CPIH services inflation increasing from
3.4% to 3.6% and CPI services inflation increasing from
3.2% to 3.7%. That makes it a
poor reason to make a dramatic change to your long-term investment strategy based on a single inflation release. But what does it really mean?
At NTM, We Help Clients Navigate These Decisions with Clarity
Over the long term, maintaining returns above inflation is what protects and grows the real value of your wealth. The more important questions are about your time horizon, your need for cash, and whether your portfolio is built to cope with both inflation and interest-rate uncertainty. Today’s inflation backdrop is not as alarming as the double-digit inflation period of 2022, but it is not fully comfortable either.
CPI is still above target, services inflation suggests some domestic price pressure remains, and the Bank of England is balancing inflation risk against signs of a softer economy. That combination can create market uncertainty but uncertainty alone does not mean investors should automatically de-risk.
What the Current Inflation Picture Means for Investors
You may want to adjust risk if:
You need money soon, particularly within the next 1–3 years: If you have known withdrawals coming up, inflation and interest-rate uncertainty make planning ahead even more important. Speak with us so we can organise the cash you need without disrupting your long-term plan.
You are uncomfortable with volatility and likely to react emotionally: Markets may move quickly as investors reassess inflation data, energy prices and Bank of England policy. Reducing risk simply to avoid short-term discomfort can feel reassuring, but it often lowers long-term returns.
You hold concentrated equities, long-duration bonds, or assets that are especially sensitive to rate changes.
Diversification matters when inflation is uneven. At NTM, we don’t aim to eliminate risk, we spread it so no single event, sector or economic outcome can dominate your returns.
The Best Approach is Often to Keep Risk the Same
For many investors, the current inflation environment is not a signal to change course. It is a reminder to check that your plan is still doing what it was designed to do:
You’re investing for the long term, typically 5–10+ years: Over long periods, diversified growth assets have historically been one of the most effective ways to protect purchasing power.
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Your NTM portfolio is already highly diversified: Our portfolios are designed to cope with a range of outcomes, including inflation remaining above target for longer, interest rates staying higher, or inflation easing faster than expected.
Your needs and objectives haven’t changed: If your goals are the same, what’s the purpose of changing your strategy? Reacting to every inflation release risks turning a long-term plan into a short-term forecast.
What We Ask Our Clients
Rather than asking, “What did inflation do this month?”, we focus on three questions that are more useful for long-term decisions:
1. What’s your time horizon?
Short horizon → less risk and more certainty.
Long horizon → inflation alone isn’t a reason to abandon growth assets.
2. Can you emotionally handle a 20–30% drop?
If not, talk to us. We can help adjust your risk level in a way that keeps you invested rather than encouraging a panic response during difficult markets.
3. Is your portfolio diversified across inflation and interest-rate outcomes?
If you’re with NTM, it will be. If not, improving what you hold is usually better than simply reducing risk across the board.
What We See at NTM
Many investors reduce risk
too late,
after inflation fears have already affected markets, or after headlines have made discomfort feel urgent.
A smarter approach is often rebalancing, not retreating.
Our investment management process:
- Trims what has become expensive
- Adds to what has become cheap
- Keeps your long‑term allocation intact
This avoids emotional decision-making and keeps your strategy aligned with your goals, even when inflation data, energy-price developments and interest-rate expectations are changing.
Inflation Should Be a Benchmark to Beat - Not a Reason to Panic
Your long-term financial security depends on achieving real returns, growth above inflation. With UK CPI still above target, cash may feel safer in the short term, but it can still lose purchasing power if returns fail to keep pace with rising prices.
At NTM, we help clients manage risk thoughtfully, stay disciplined, and remain focused on what truly matters: meeting your goals, protecting your purchasing power, and avoiding decisions driven by short-term noise.
Risk Warning: This article is for general information only and does not constitute personal financial advice. The value of investments can fall as well as rise, and you may get back less than you invest. Past performance is not a reliable guide to future returns. Inflation, interest rates and market conditions can change, and any investment decisions should be based on your individual circumstances and objectives.
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