Market highs expected to give way to volatility

All three major US stock indexes soared to record highs on Thursday on the back of Nvidia’s AI results – but market volatility looms, warns the CEO of one of the world’s largest independent financial advisory and asset management organisations.

The warning from Nigel Green of deVere Group comes as the S&P 500 achieved its 12th record close of 2024, the Nasdaq 100 witnessed a remarkable 3% surge, and the Dow Jones industrial average surpassed the historic milestone of 39,000 for the first time.

This bullish momentum was significantly propelled by Nvidia’s stellar financial results, rekindling faith among investors in the potential profitability of breakthroughs in artificial intelligence (AI). Nvidia, a leading technology company specialising in graphics processing units (GPUs) and AI solutions, saw its shares soar, adding a staggering $277 billion in market capitalisation.

The deVere CEO says: “While the stock markets’ recent surges are undoubtedly impressive, investors must remain vigilant, as we believe there’s a storm of volatility on the horizon. 

“The primary driver of this uncertainty stems from the lack of clarity provided by major central banks, including the Federal Reserve. 

“Investors are anxiously awaiting the Fed’s decision on interest rates, with the consensus now growing there’ll be no rate cuts in March as was previously expected by the markets.

“If this expectation materialises, it could trigger a significant market reaction, leading to increased turbulence, and we expect the Fed’s major central bank peers could follow their lead too.”

However, potential volatility could provide investors with even more opportunities to build wealth with the right advice.

“Volatility helps 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,” affirms Nigel Green.

“There will be winners and losers, of course, with heightened turbulence. Picking the right sector, as always will be vital. 

“I think we can safely assume that the right sectors will include Artificial Intelligence – as exemplified by Nvidia this week – as companies look to AI to reduce costs and increase productivity.”

He continues: “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 these companies allows for exponential growth and, in addition, these stocks can often provide a hedge against volatility.”

Nigel Green concludes: “While the stock market celebrates historic highs, investors are reminded to remain cautious and well-informed. 

“There’s considerable potential for wider market volatility on the horizon due to central bank uncertainty, among other issues, such as pressure in discretionary spending.

“However, we expect AI-related stocks to continue to outperform the broader market.”

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