Investors should embrace expected market volatility triggered by the likely decision of the U.S. Federal Reserve to double the pace of its taper to $30 billion a month at its meeting this Wednesday.
Indeed, the four top stock market indices all fell considerably on Monday. The Russell 2000 tanked 1.42%, Nasdaq gave up 1.32%, the S&P 500 was off by 0.91%, and the Dow was right alongside there, falling by 0.89%.
I believe at this week’s Fed meeting, the final one for 2021, we’ll see a considerable shift in policy as the Federal Reserve – the world’s de facto central bank - starts to remove its unprecedented program to help soften the economic blow from the pandemic.
Sooner Than 'Priced in'
We could see the Fed hike rates sooner than is currently "priced in" by markets.
The central bank will give several months’ notice to the markets for a major policy shift. As such, if it is to maximise flexibility to raise rates, they will begin sooner rather than later, even as soon as next week.
This will likely create some turbulence in the market. To what degree will, of course, depend on the content and tone of these discussions.
Savvy investors will embrace the volatility as it provides buying opportunities ahead of the anticipated end-of-year market rally – despite the joke-like term, the ‘Santa Claus Rally’ is something history shows can give a big boost to portfolios.
These investors will be taking advantage of lower values to enhance their portfolios for the longer-term growth of their wealth.
Especially as they are already buying the Omicron-triggered dip in certain sectors that got hit by a sell-off due to an initial knee-jerk reaction to the new variant.
Remain Invested, Diversified
Investors should not get spooked by the Fed’s probable decision to decide to double the pace of its taper to $30 billion a month at the meeting next week.
They should remain invested, ensure portfolios are properly diversified, and use the expected temporary bout of turbulence to their financial advantage.
London-born Nigel Green is founder and CEO of deVere Group, which specializes in sustainable investing. 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.
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