Global Sell-Off Should Be A Reality Check for Investors

Published on 12th May 2021

Concerns about inflation that are rattling global stock markets on Tuesday should be used as a reality check for investors. The observation from comes as the pan-European Stoxx 600 index dropped 2.3%, with London’s FTSE 100 falling 2.4%.

Losses in Europe follow those in the Asia Pacific region. Hong Kong’s Hang Seng closed more than 2% lower and Japan’s Nikkei 225 ended the Tokyo trading session having shed more than 3%. Meanwhile, U.S. futures are down across the board ahead of the opening bell in New York.

It is to be expected that there would be a jump in prices and supply shortages, in goods like chips and some commodities, as economies re-open and pent-up demand is unleashed by households, businesses and entire industries.

We’re at a point of major readjustment following an unprecedented economic shock and this is fuelling concerns that rising inflation will trigger central banks to tighten monetary policy which will hit asset prices. It is this scenario that is rattling markets and triggering a global sell-off.

Tech shares are bearing the brunt of the sell-off, but this will also be used as an opportunity. With our daily lives becoming ever more digitalized – and at a staggering pace - tech will remain one of the mega-trends for investors for the foreseeable future.

Savvy investors will be drawn to the massive growth that tech offers and this sell-off will used as a buying opportunity.  Nobody seriously believes the future isn’t online.

Therefore, investors would be wise to be “selective” about the sell-off. With some of the heat being taken out of the markets, with some stocks way too high, they are likely to – perhaps more judiciously than before – move to capitalize on this dip.

Of course, I don’t have a crystal ball, but history shows that stock markets typically rise over the longer-term. Therefore, in the near future, I predict many investors will be seeking out the buying opportunities that exist.

By Nigel Green, 
Chief Executive and Founder of deVere Group, one of the world’s largest independent advisors of specialist global financial solutions

 


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