Investors are facing a myriad of uncertainties that pose substantial risks to the stability and performance of global markets – but as ever, where there are risks, there are also significant opportunities.
Here, Nigel Green, the CEO and founder of deVere Group, one of the world's largest independent financial advisory, asset management and fintech organisations, shares what he believes are the four most significant risks confronting global markets in 2024 and examines their potential impact on investors.
1. Middle East crisis escalation
"One of the most pressing risks facing global markets is the potential escalation of the Middle East crisis. The October 7 attack by Hamas on Israel has heightened concerns about the possibility of the conflict spreading to involve other nations and groups in the region.
"Any escalation could disrupt global oil supplies, leading to increased market volatility. Investors are closely monitoring the situation, as heightened tensions may have profound implications for energy prices and overall market stability.
"Industries tied to energy, transportation, and commodities could experience significant fluctuations. Diversification and risk management strategies will be crucial for investors to navigate potential geopolitical shocks emanating from the Middle East."
2. Resurgent inflation
"While inflation witnessed a decline from its 2022 peaks in most major economies, including the US, UK and eurozone, the spectre of resurgent inflation remains a critical risk in 2024.
"Energy prices, a major driver of inflation, are known for their volatility, and any sudden surge could lead to an increase in the headline inflation rate.
"Central banks, in response, may be compelled to raise interest rates to curb inflationary pressures, defying market expectations of rate cuts.
"For investors, a scenario of rising inflation and higher interest rates poses challenges, particularly in fixed-income investments and interest-sensitive sectors.
"Corporate earnings could be impacted, and the heightened risk of recession may lead to a reassessment of investment portfolios. Investors must remain vigilant and adjust their strategies in response to changing inflation dynamics to preserve capital and optimise returns."
3. Elections across the globe
"2024 is marked by decisive elections in over 40 countries, representing more than 50% of the world's GDP.
"Elections introduce an element of political uncertainty, and outcomes can shape economic policies, trade relations, and market sentiments.
"Key players, including the UK, the US, China, India, Taiwan, South Korea, Ireland, South Africa and others, are set to undergo electoral processes that could have far-reaching consequences for global markets.
"Investors are likely to face increased volatility in the lead-up to and aftermath of elections. Shifts in political landscapes typically result in policy changes that impact various sectors, prompting investors to reassess their portfolios."
4. China's growth crisis
"Contrary to earlier forecasts, China's post-COVID-19 reopening has not led to the anticipated growth in 2023.
"The real estate crisis, representing a significant portion of China's GDP, has been a key impediment to economic recovery.
"As we enter 2024, the prospect of China's economic stagnation looms large, carrying implications for trade partners and global markets.
"Investors with exposure to China or industries heavily reliant on Chinese demand may face challenges if the economic downturn persists. Supply chain disruptions, reduced consumer spending, and market volatility could ensue, impacting the performance of multinational corporations."
The deVere CEO concludes: "The interplay of geopolitical tensions, inflationary pressures, electoral outcomes, and China's economic woes underscores the need for a proactive and diversified approach to investment management to protect and grow personal wealth."