Investors may be well advised to build liquidity in the early part of 2016 and ride out ongoing market volatility, an international advice group believes.
With forecasts predicting continued volatility across global financial markets over the next six months, deVere Group senior international investment strategist, Tom Elliott, urged investors to expect and prepare for tough times.
"Investors should expect volatile financial markets in the first half of next year, as stock and bond markets learn how aggressive the Fed is likely to be in its monetary tightening," he said.
"There are, however, a few safe bets. The European Central Bank (ECB) last week revealed itself to be less willing to expand its QE (quantitative easing) program than had been supposed, which somewhat undermines the strong dollar/ weak euro bet that underlies much stock and bond market asset allocation.
"To prepare for this expected wave of volatility in the first half of 2016, investors need to ensure that their portfolio is properly diversified across asset classes, sectors and regions.
"This will best position them to be able to take advantage of the inevitable upside that arises from volatility and to sidestep the risks.
"Many are likely to favour Eurozone and Japanese equities over those of the US and emerging markets, on the grounds that structural economic reforms in both will deliver long-term domestic demand growth even if the benefits of QE are more questionable.
"In addition, they might also consider building up liquidity to use to buy into financial markets later in 2016, by which time, history suggests, markets may have regained some stability."
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