Written by: George Prior
Markets are going to get volatile this summer as investors ramp up speculation about the US Federal Reserve’s interest rate policy as fresh inflation data is released, warns the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.
The warning from deVere Group’s Nigel Green comes as the US government releases the consumer price index for April on Wednesday, showing that US CPI fell to 4.9%.
He says: “The US CPI data is out and, at 4.9%, came in lower than expectations.
“Investors will be asking ‘Where do we go from here?’
“Many senior analysts will now insist that this will be enough for the Federal Reserve to pivot at their meeting in June and pause the hiking agenda.
“Some will go further and argue that the central banks will cut rates as early as July.
“Others, however, believe that the Fed will remain cautious about inflation flaring up again and that officials will ultimately insist upon at least another interest rate hike. This could cause jitters in the markets as some investors, concerned about short-term profits, will move into panic-selling mode.”
He continues: “What we do know for certain are two things.
“First, speculation is going to increase and that this triggers market volatility. Investors should brace for a turbulent summer fuelled by uncertainty.
“Second, the US economy is cooling quicker than had been anticipated. We put this down to the Fed being too aggressive with their rate hikes.
“As I said last week, the failing Fed made another mistake with the latest interest rate hike, which could push the world’s largest economy not only into a short-term but a longer-term recession. Clearly, this would not only be a huge issue for the US, but the global economy too.”
The deVere CEO goes on to add: “The reality is investors must be vigilant and not become complacent due to the potential of no more imminent hikes and/or the possibility of rate cuts.
“Plus, we have the Republicans and Democrats failing to agree on to how to deal with the major issue of the US debt crisis. Last time this happened we had a 20% drop in the market.
“It’s essential for investors to take good advice and realise that in a fast-changing world the underlying importance of being in the right sectors at the right time still applies, in fact more now than ever.”
He concludes: “We expect markets to be in for a wild ride this summer. But, as ever, where there’s volatility, there is also considerable opportunity.”
Related: US Inflation Progress Might Stall, but Fed Must Drop Rate Hikes Agenda