Inflation said it just needed a place to crash while it got back on its feet, but now, it has officially moved into the U.S. And investors must buckle up and prepare as inflation-triggered volatility is set to shake up markets until the end of 2021, warns the CEO of deVere Group.
The warning from Nigel Green, CEO and founder of deVere, one of the world’s largest financial advisory, asset management and fintech organizations, comes as Chinese stocks plummeted to almost their lowest level in a year, with price surges cooling hopes for measures to help economic growth.
It also comes ahead of the latest U.S. inflation data on Wednesday. The consumer price index (CPI) is expected to show a 0.6% jump compared to the previous month, or a year-over-year gain of almost 6%, which would be the biggest in 30 years.
According to Mr. Green, growing inflation fears “are going to spook global financial markets as we move towards the end of the year.”
“Whilst markets might not be balking right now, as they currently have a sort of tunnel vision, with central banks and governments around the world pulling back their unprecedented support programs due to price surges amongst other factors, the easy money tap is steadily going to dry up.”
Investors need to avoid complacency to prepare for inflation
As central banks are increasingly flagging, “inflation has become a concern and growth is to become slower due to supply-side bottlenecks – and, therefore, interest rate hikes are coming.”
This, according to Mr. Green, will trigger increasing market volatility moving forward as the world readjusts again.
Last week, as several major central banks gave their latest forecasts, the deVere CEO said, “This is the hardest time to be an investor and worst time not to be. There are real opportunities to be had, but navigating the territory is set to become more complex in coming months as we move towards a new era of interest rate normality driven partly by inflation fears.”
Investors, he observes, should remain in the market, but they should review their portfolios to ensure that they are properly diversified across asset classes, sectors, regions, and currencies. This will ensure they are best positioned to mitigate the downsides and seize opportunities arising from the likely volatility.
Wrapping up
From China to the United States and the UK to Europe, inflation risks are building, and this will increasingly rattle the markets. The question is, are investors ready for the shakeup?
