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Written by: George Prior
Markets’ jittery start to 2024, after coming off a strong pan-markets year-end rally, underscores that investors must avoid complacency, warns the CEO of one of the world’s largest independent financial advisory and asset management organisations.
deVere Group’s chief executive Nigel Green is speaking out after a bumpy start to the New Year.
US markets mostly dropped on the first day of trading of 2024, with the Nasdaq Composite having its worst day since October, with US futures looking to the downside on Wednesday.
Overnight, Asia-Pacific markets fell also, with stocks in South Korea and Taiwan leading the losses.
Meanwhile, European markets were headed into a negative open on Wednesday too.
Nigel Green says: “Financial markets experienced a jittery start in 2024, juxtaposed against the backdrop of a robust pan-markets year-end rally.
“This oscillation in market sentiment, driven by various factors including tensions in the Red Sea – a key global trade route - serves as a stark reminder that investors must avoid complacency in the face of uncertainty.
“The year-end rally, characterised by a surge in global markets, had fuelled optimism among investors.
“Buoyed by some positive economic indicators, robust corporate earnings, and promising developments in various sectors, many believed that the momentum would seamlessly carry into the New Year.
“However, the abrupt shift in market dynamics at the onset of 2024 has underscored the fickle nature of financial markets and the need for a cautious approach.”
The deVere CEO was one of the few voices urging caution in December after the Federal Reserve’s last meeting of 2023, when markets appeared to be “overly confident of a policy pivot” by the US central bank.
At the time he told media outlets: “Will the Fed really pivot with inflation stubborn? We think not.
“Yet markets seem to be getting carried away that the Fed and its peers of major central banks are ready to pivot.
“Significant opportunities remain, but investors should avoid complacency.”
One key lesson from the market’s early-year volatility is the importance of staying vigilant and adaptable. Complacency, often born out of prolonged periods of market stability, can blind investors to potential risks.
“The world is a dynamic and interconnected system, susceptible to a myriad of geopolitical, economic, and environmental factors. As such, assuming that the status quo will persist, this can lead to financial vulnerability,” warns Nigel Green.
The markets’ nervous start also reinforces the importance of diversification in an investment portfolio.
“A well-diversified portfolio can help mitigate risks associated with the volatility of individual assets or sectors. By spreading investments across various asset classes, geographies, and industries, investors can enhance their resilience to market fluctuations.”
The deVere Group CEO goes on to add that savvy investors recognise that market volatility, often viewed as a source of uncertainty, can be strategically leveraged to their financial advantage.
“Rather than fearing fluctuations, these investors see opportunities. During periods of heightened volatility, asset prices can deviate significantly from their intrinsic values, presenting buying opportunities for undervalued assets or selling opportunities for overvalued ones.”
He concludes: “We expect the volatility to continue for a while yet. Investors should avoid complacency, but also seek out the inevitable opportunities.”
Related: Top 4 Global Market Risks for 2024