Investors could be hit by uneven global stock markets.
The warning comes as stock markets around the world extend their remarkable rallies despite a continuing global public health emergency, economic downturns and financial upheaval, political uncertainty and widespread social unrest.
Wall Street is expected to open higher again on Tuesday – with the benchmark S&P500 less than 10 per cent from its all-time high.
In the Asia-Pacific region and across Europe, all major indices made gains.
Global markets are continuing to rally. This is extraordinary as tensions between the U.S. and China – the world’s two largest economies – are heightened, when the President of the U.S. is threatening to deploy the U.S. army onto the streets of America, and as the global economy attempts to recover due to an ongoing pandemic for which there is still no cure, to name a few of the current factors causing chaos.
All of this would normally send the markets into tailspin. Yet this time they continue to rally.
But a closer look at the markets shows the upswing is being fuelled by a handful of companies that reflect the ‘new world’, which is increasingly tech-driven.
This is concerning as some investors could potentially take a significant hit.
Investors who buy an exchange-traded fund, or ETF, which are investment funds traded on stock exchanges, could be particularly at risk from uneven markets.
In these highly unusual times, ETFs are the wrong place to invest right now.
Actively managed funds can be expected to outperform in 2020 and beyond.
The world has been ‘reset’ and as it readjusts, we will see new industries, new trends and new highly successful companies emerge – and probably quicker than many might expect.
To fully capitalise on the major opportunities of this new era, and to mitigate the risks of considerable market imbalance, investors should ‘think active’ to be in the right stock.
In the current climate, actively managed funds are likely to best position investors to navigate the new world.
Nigel Green is the chief executive and of deVere.
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