Investors: Get ready for market volatility this summer
Following the release of April’s latest US consumer price index data, volatility will be prevalent throughout the markets this summer as investor speculation over the Fed’s interest rate policy increases.
The latest data out on Wednesday revealed that US CPI declined to 4.9%, which is lower than forecast.
Therefore, investors will be asking themselves, ‘What’s next’?
As I was quoted by Proactive Investors, Mena FN and Investor Ideas, amongst other media, no doubt many senior analysts will believe this will be sufficient for the Fed to pause their hiking policy at next month’s meeting. And I’m sure that some will say the central bank may slash rates as soon as July.
However, others are of the opinion that the central bank will maintain its cautious approach over concerns inflation may flare up again. As such, officials may insist on at least one more hike.
This may cause jitters in the markets as some investors shift into panic-selling mode.
That said, we do know two things for sure.
One, speculation will mount, which leads to market volatility. As a result, investors should be prepared for a turbulent, uncertainty-fuelled summer.
Two, the US economy is cooling quicker than first thought. This may be due to the Federal Reserve being too aggressive with their rate hikes.
As I mentioned last week, the Fed made yet another mistake with this latest rise. This mistake could drive the world’s largest economy not into a short-term but a longer-term recession. This would obviously be a massive issue for the US and the global economy.
Therefore, investors need to remain vigilant and not get too complacent over the likelihood of no more imminent hikes and/or the chance of rate cuts.
It is crucial investors seek good advice and know that in a fast-changing world, the increasing importance of being in the right sectors at the right time applies now more than ever.
We forecast markets are in for a wild ride this summer. That said, wherever there’s volatility, there is also substantial opportunity.