Investment market volatility is ‘here to stay’ unless global recession strikes: analyst
Wealthy investors should be ready for higher volatility “for years” as uncertainties around artificial intelligence (AI) development and geopolitical risks are set to persist, according to a major private bank. In the past few years, asset prices underwent several roller coaster rides, from US Liberation Day last year to the sell-off of semiconductor shares and US Treasury in recent months. But…
Highly wealthy investors should brace themselves for heightened market volatility "for years" due to uncertainties surrounding artificial intelligence and geopolitical risks, according to a senior analyst. In recent times, asset prices have experienced significant fluctuations, from the US Liberation Day rally to the decline of semiconductor shares and US Treasuries.
Julia Wang, the North Asia chief investment officer at Nomura International Wealth Management, stated that this volatility has been a result of structural changes to the market over the decades and is likely to persist unless a global recession occurs. Despite reaffirming Nomura's optimistic outlook on AI and the global economy, Wang explained that the market's expectations of high returns from AI have led to crowded trading and leverage, which typically result in market sell-offs.
This trend was exemplified by the decline of Korean semiconductor shares, as the Korea Composite Stock Price Index plummeted 22 percent following a record high in late June, causing a SK Hynix-focused exchange-traded fund to plummet 71 percent in a single month. While Asian fund managers have shown caution, Wang noted that affluent investors are increasingly seeking a more flexible approach to fixed income, such as investing in the credit or rates markets.
Additionally, geopolitical fragmentation and policy uncertainty could negatively impact offshore investments, potentially leading to higher inflation, as the International Monetary Fund projects global headline inflation to reach 4.7 percent this year before falling to 3.9 percent in 2027. Wealthy investors are primarily focused on protecting their existing gains from potential downside risks, and Nomura has advised clients to diversify their assets to hedge against structural risks and manage AI-linked volatility.
Wang also emphasized the importance of focusing on corporate fundamentals to avoid panic-selling and staying invested for quick market rebounds.
Written by urgent.news from South China Morning Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
