The U.S. consumer price index has risen 0.3% in the final month of 2023, or 3.4% for the full year.

Core inflation, which strips out the volatile food and energy components, slowed to 3.9% in December, from 4% the prior month.

The progress on inflation is now slow and incremental.We believe that there’s still not enough evidence for the central bank to start cutting rates.

With inflation remaining sticky, we expect rates will be higher for longer. We don’t see a policy pivot in sight.

But in recent months, markets have been exuberant and got carried away with the idea that the Fed – and its major central bank peers- will start rolling out rate cuts in 2024.

The markets have been pricing-in these cuts too quickly.

There’s a reality chasm between what the Fed has signalling regarding rate cuts and what the markets are expecting.

Certainly, some stock surges – such as those which are AI-orientated - are reasonable. Yet many others have been getting ahead of themselves

Investors should diversify across asset classes to spread risk and capture opportunities arising from different market conditions; and to consider alternative investments that may provide returns less correlated with traditional asset classes.

Thursday’s U.S. inflation data represents a serious challenge the markets expectations for big, imminent Fed rate cuts.

Core CPI remains roughly double the Fed’s long-term target. Meanwhile, while headline inflation jumped more than expected.

The market is setting itself up for disappointment by pricing-in 5 or so rate cuts this year.

There remain considerable opportunities remain for building long-term wealth, but investors should avoid being swept away with current market overconfidence.

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London-born Nigel Green is founder and CEO of deVere Group. Following in his father’s footstep, he entered the financial services industry as a young adult. After working in the sector for 15 years in London, he subsequently spent several years operating within the international space, before launching deVere in 2002 with a single office in Hong Kong. Today, deVere is one of the world’s largest independent financial advisory organizations, doing business in 100 countries and with more than $12bn under advisement. It specializes global financial solutions to international, local mass affluent, and high-net-worth clients. In early 2017, it was announced that deVere would launch its own private bank. In addition, deVere also confirmed it has received its own investment banking license.