Global investors are right to shrug off tanking oil prices and remain positive

Global investors are right to shrug off tanking oil prices and remain positive, affirms the chief executive of one of the world’s largest independent financial advisory organisations.

The comments from Nigel Green, founder and CEO of deVere Group, which has $10bn under advice, come as oil prices plunge following the collapse of the summit in Doha involving the world’s major oil producers which was aimed at capping output.

Mr Green observes: “Oil prices have tanked after OPEC, an organisation that is plagued by internal differences amongst its main players, has been unable to get a deal that will stem production.

“However, it appears that global investors have largely shrugged off plummeting prices and have a generally positive outlook – and they are, I believe, right to do so.”

He continues: “Stock markets have taken the news on the chin.  It would seem that the strong correlation ‎between global stocks and the oil prices, which was a hallmark of the downturn in markets earlier this year, isn’t now asserting itself.

“This could perhaps be because investors are focusing on the continued positive flow of U.S. economic data, and some stability taking hold in the Chinese economy.  And lower energy prices are, of course, good for the non-energy related sectors on global stock markets.”

Mr Green concludes: “As ever, the best way for investors to grow and maximise their wealth in the ever-shifting markets is to mitigate risks and to capitalise on the upsides by having a well-balanced portfolio that’s appropriately diversified across asset classes, sectors and regions.”

Last week, deVere Group’s International Investment Strategist, Tom Elliott, commented: “Whilst there are certainly risks, and there always are, I believe the second quarter of 2016 will be considerably less volatile than the first.

“There are three reasons for this. First, the U.S. Federal Reserve is far more emollient in its forecasts for U.S. rate hikes than it was three months ago, while recent economic data suggests continuing stable economic growth in America.

“Second, the much-forecasted hard landing for the Chinese economy has failed to materialise. At 6.5 per cent the economy is still growing at a decent clip.

“Third, a major source of weakness on financial markets in recent years has been the resources sector. But this is going through a period of self-healing. Certainly, it remains very susceptible to news flow from China regarding potential demand growth. But the over-supply issues that bedevil companies in the resources sectors are being addressed through the axing of new energy and mining projects, and closing of uneconomic operations. Companies are bearing down on operating costs, and less generous but more sustainable dividend policies.”