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Investors advised to prepare for central bank policy divergence, says deVere CEO
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Investors advised to prepare for central bank policy divergence, says deVere CEO
The Bank of England, European Central Bank (ECB), and US Federal Reserve are set to take different paths in their monetary policies, which will significantly impact investors around the world, according to Nigel Green, CEO of deVere Group, one of the world's largest independent financial advisory and asset management organizations.
Investors advised to prepare for central bank policy divergence, says deVere CEO
The Bank of England, European Central Bank (ECB), and US Federal Reserve are set to take different paths in their monetary policies, which will significantly impact investors around the world, according to Nigel Green, CEO of deVere Group, one of the world's largest independent financial advisory and asset management organizations.
The Bank of England is expected to maintain interest rates at 5.25% in its upcoming decision on Thursday, while the ECB is widely anticipated to cut rates next month. In contrast, the US Federal Reserve has pushed back expectations for rate cuts to September at the earliest due to persistent inflation.
"Clearly, this divergence of three major central banks impacts investors around the world, and many will be preparing to adjust their portfolio mix accordingly to seize the opportunities when they're presented," Mr Green said.
The divergence in central bank policies is likely to have a significant impact on currencies. If the Bank of England maintains its interest rates, the British Pound (GBP) could see stability and appreciation against other major currencies, while the anticipated rate cut by the ECB is expected to weaken the Euro (EUR) against its counterparts.
Meanwhile, the US Dollar (USD) is strengthening against its peers due to the Fed's firm stance on delaying rate cuts until at least September.
Central bank divergence also presents opportunities in equity markets across the UK, EU, and US, with sectors such as tech, healthcare, and consumer discretionary potentially thriving in an environment of stable interest rates and improving economic conditions in the UK.
In the Eurozone, the anticipated rate cut by the ECB could stimulate equity markets, particularly in sectors sensitive to interest rate changes, while in the United States, sectors resilient to inflationary pressures, such as tech, financials, and healthcare, may outperform.
Bond markets in all three regions are also likely to be influenced by central bank divergence, with the ECB's anticipated rate cut potentially driving bond prices higher across the Eurozone, while the Fed's firm stance on delaying rate cuts may lead to higher yields on US Treasuries.
Mr Green urged investors to adopt a nuanced approach to asset allocation and risk management in response to central bank divergence.
"With three major banks likely diverging on monetary policy, those who are serious about safeguarding and growing their wealth should be paying close attention," he concluded.
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