Markets at record highs demand discipline

Global stock markets are smashing records, but this is exactly when investors must exercise more discipline than normal, warns Nigel Green, CEO and Founder of global financial advisory giant, deVere Group.

“The MSCI All Country World Index, the S&P 500, Japan’s Nikkei 225 and South Korea’s Kospi have all recently hit new heights.

“These are extraordinary milestones, but they are also flashing caution signals,” says Nigel Green. “Whenever prices outpace the real economy, risk is rising even when sentiment suggests otherwise.”

The rally has been fuelled by stronger-than-expected corporate earnings, especially in technology and consumer discretionary sectors, and by expectations that the US Federal Reserve will continue cutting rates into year-end, starting Wednesday. Liquidity is plentiful, which Nigel Green calls “the oxygen of bull markets.”

But, he stresses, liquidity is no substitute for solid economic foundations. US consumer inflation remains near 3%, the highest since January, and new tariffs introduced by President Trump are already affecting global supply chains.

“Markets are pricing in perfection: cheaper money, steady growth and permanently rising profits. History teaches us that kind of assumption rarely ends well,” he warns.

He points to the technology sector as a prime example. “Oracle added more than $240 billion in market value in a single session after an AI forecast. Genuine innovation is happening, but investors appear willing to pay almost any price for the mere promise of leadership,” he says.

The dominance of a handful of mega-cap technology companies is another risk. “When a narrow group drives global index performance, portfolios are exposed to sudden disappointment—whether from earnings misses, regulatory action or a shift in monetary policy,” Nigel Green explains.

“History shows that when just a few companies carry the market, volatility eventually follows.”

The global backdrop adds complexity. European markets are strong despite sluggish growth and weak consumer confidence. China’s industrial rebound remains uneven, and the latest round of US tariffs has yet to show its full impact on Asian exporters.

Meanwhile, the US dollar has softened on the prospect of further Fed easing.

“Any sign of hawkishness or a fresh escalation in trade tensions could send the dollar sharply higher, tightening financial conditions and putting pressure on emerging markets,” Nigel Green notes. “For globally mobile investors, active currency management isn’t optional—it’s central to long-term capital preservation.”

He urges investors to resist momentum and review portfolios with an unsentimental eye. Where positions, particularly in technology, have swelled beyond their intended weight, he recommends trimming and reallocating to areas with steadier valuations and dependable cash flow.

He emphasizes that diversification must be deliberate, spanning regions and asset classes to counterbalance heavy US exposure, with opportunities in selective European equities, high-grade Asian credits and real-asset strategies.

Alternatives such as infrastructure, private credit or carefully chosen hedge funds, he adds, can provide valuable shock absorbers when public markets falter.

The deVere CEO also stresses the importance of protecting liquidity. Strong markets can lull investors into illiquidity, yet the ability to raise cash quickly allows families and institutions to seize opportunities when volatility returns.

“Liquidity is an offensive as well as a defensive tool,” he says.

Above all, he believes discipline is paramount.

“Extraordinary highs demand extraordinary discipline. It’s tempting to believe central banks will underwrite asset prices indefinitely or that tech innovation will justify any valuation. Such assumptions are rarely rewarded,” he cautions.

Despite the risks, Nigel Green’s outlook remains constructive.

“Global growth is not collapsing, many leading companies have significantly robust balance sheets, and there are genuine opportunities for patient capital,” he says.

“But optimism must be balanced with realism. Markets can certainly climb higher, yet that is not a reason to relax risk management. On the contrary, buoyant prices are the moment to prepare carefully for the future.”

“Capital preservation is the first duty and compounding a close second,” Nigel Green concludes.

“This rally offers the chance to secure both, provided investors maintain clarity of purpose and refuse the easy narrative that rising prices mean falling risk.”