On Friday, Wall Street’s S&P 500 reached its first record close in more than two years. The CEO of one of the world’s largest independent financial advisory and asset management organisations is issuing fresh warnings to investors.
The “urgent alert” from deVere Group’s Nigel Green comes as the large-cap benchmark index SPX finished at 4,839.81 on Friday, surpassing the prior record close of 4,796.56 reached on January 3 2022.
He says: “With the S&P 500 topping 4,800 for the first time in its 66-year history, it’s all-too-easy for investors to become overly confident and complacent.
“I would suggest that they need to exercise caution and avoid unnecessary mistakes due to said complacency, which could, unfortunately, prove to be extremely costly.”
The deVere CEO says there are two key takeaways for him from Friday’s record S&P 500 highs.
“First, markets are getting ahead of themselves. Much of the frenzy is being driven by hype that the Federal Reserve is about to start cutting rates after the most aggressive tightening agenda in generations.
“While this may be the case, it cannot be stressed enough that although inflation is certainly down from the multi-decade highs, it remains sticky.
“Is there really enough evidence for the Fed to pivot? The jury’s out.
“Also, the central bank officials are likely to be watching this surge with a degree of angst.
“What will happen to markets, they will be asking, when they do eventually cut rates?”
He continues: “Second, tech stocks are driving early-year gains.
“For me, this is further proof that investing in technology stocks, particularly those related to artificial intelligence (AI), has become imperative for investors aspiring to build long-term wealth.
“The rapid evolution of the tech industry has transformed it into a driving force behind global economic growth.
“Companies leveraging AI technologies exhibit a competitive edge, leading to increased profitability and sustained growth. By investing in AI, investors will be aligning themselves with the forefront of innovation, capitalising on the transformative power of intelligent automation, machine learning, and data analytics.
“Plus, the scalability of tech companies allows for exponential growth and, in addition, tech stocks can often provide a hedge against economic downturns.”
Recently, Nigel Green told the media that with the ongoing lack of clarity from major central banks, including the Fed, he would not be surprised to see markets falling into correction territory this quarter. As such, “investors should buckle up for turbulence.”
A correction is typically defined as a decrease of at least 10% but less than 20% from the most recent high. Corrections are a common occurrence in financial markets and are considered a natural part of market cycles.
He notes that a potential correction could provide investors with “even more opportunities” to build wealth with the right advice.
“Corrections help markets maintain a balance by preventing excessive speculation and unsustainable price increases. They provide an opportunity for overvalued assets to readjust to more reasonable levels,” he notes.
The deVere CEO concludes: “Investors must be cautious regarding the hype surrounding the S&P 500’s record highs.”