1st October 2015
Global financial markets are behaving irrationally in response to various geopolitical factors and investors need to be prepared for trouble ahead, Nigel Green CEO of deVere Group has warned.
The boss of the financial advisory group highlighted that the third quarter, which has been the worst on the world’s financial markets since 2011 – saw markets rally on most global indices, ending with a 2% gain.
He said: “This rally was largely unexpected considering that the markets remain justifiably nervous about the outlook for the fourth quarter.”
“The US corporate earnings growth cycle has begun to roll over, slower Chinese economic growth threatens to drag down demand growth across the world – no-one is entirely sure when the Fed will raise rates and how the US and global economies and markets will react.
“There are swathes of poor economic data being published in key emerging markets and Russia has launched a series of air strikes in Syria against, it would appear, the West’s allies, which must add to regional tensions.”
Typically such a combination could be expected to be seriously spooking global financial markets. Yet, the markets seem almost oblivious noted Green.
“It is concerning in itself that when there are so many things to be concerned about, the markets appear to be unconcerned,” he added.
Green asserted that this “irrational verdict from the markets to various far-reaching geopolitical events and underwhelming economic data” suggests that the rally could be temporary and that investors need to brace themselves for a rocky time ahead.
The CEO adds: “We should not expect this rally to last. October is likely to be characterised by volatility.
“Those investors with a well-diversified portfolio will be those who are best able to manage risk and limit any potential downside, but also best placed to secure exposure to the growth opportunities that will inevitably come along, perhaps in areas such as the Eurozone, China and Japan.”