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Tags: federal reserve interest rate hike | retirement savings | volatility | buy on the dip | diversity

Nigel Green: An Imperfect Fed Could Derail Investors

Nigel Green: An Imperfect Fed Could Derail Investors
A New York Stock Exchange trader just after the opening bell on March 9, 2020, at the very beginning of the coronavirus pandemic when trading was temporarily halted when stocks joined a global rout on crashing oil prices and mounting pandemic worries. (AP)

Nigel Green By Wednesday, 21 September 2022 12:20 PM EDT Current | Bio | Archive

The Federal Reserve is immersed in a critical two-day meeting, at which it is widely expected to raise interest rates by another 75 basis points Wednesday.

Once again, the central bank is driving stock markets, investor sentiment and decision-making.
__________

Long-term investors will be using any volatility as an opportunity. History and recent data teach us that market turbulence usually creates major opportunities to build wealth
__________

Last week, markets were in tumult and now in a wait-and-see pattern as they look for direction

Federal Reserve Chairman Jay Powell will not come out and sound hawkish when he speaks on Sept. 21 at 2:30 p.m. EST. He will say he’s committed to bringing down inflation. This translates into raising interest rates higher and faster than Fed and the other central bank leaders once anticipated to cool off the economy and slow down prices. This also means that businesses and households face higher costs.

While some of this expectation will already be priced-in by the markets, it is also likely to generate uncertainty – which markets loathe – and this, of course, can create mass anxiety amongst investors. This is a concern.

Of course, investors should avoid complacency, but similarly, they should avoid panicking and responding to market reaction that is being driven by imperfect Fed policy tools.

There is a risk that oversized interest rate hikes would cause a recession and may not be effective as the soaring prices are partly triggered by external issues – which the Fed’s hikes alone will not solve.

Instead, whatever is announced by the Fed – which is guilty of grand-scale inaction early on in tempering red-hot inflation – should be considered, but not given precedence over basic investment truisms.

Investors should look to allocate cash to risk assets – thereby following the adage "to buy when others are fearful" – while remaining well diversified by asset type as well as sector and geography.

Long-term investors will be using any volatility as an opportunity. History and recent data teach us that market turbulence usually creates major opportunities to build wealth for investors who top-up their portfolios with quality stocks at lower prices.

The Fed will be forced to respond to the stubbornly high inflation numbers. This will drive investor anxiety again and potentially bad investment decision-making.

As an investor, your future self will thank you for cutting out the noise right now and focusing on time-honored fundamentals including future trends, diversification, cash flow and profitability.
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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.

© 2022 Newsmax Finance. All rights reserved.


NigelGreen
The Federal Reserve is immersed in a critical two-day meeting, at which it is widely expected to raise interest rates by another 75 basis points Wednesday. Once again, the central bank is driving stock markets, investor sentiment and decision-making.
federal reserve interest rate hike, retirement savings, volatility, buy on the dip, diversity
534
2022-20-21
Wednesday, 21 September 2022 12:20 PM
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