5 risks that financial experts see with the record stock markets and why they should not be underestimated

5 risks that financial experts see with the record stock markets and why they should not be underestimated

The good mood on the stock markets and the new record highs of the S&P 500 and the Dow Jones give cause for euphoria among investors. But as a financial expert, I see five risks that could cloud the year for stock and ETF investors.

According to a report from www.focus.de, the first risk is that interest rates will not fall for the time being. The expectation of falling interest rates has had a significant influence on the price rally in recent months. The US Federal Reserve Bank indicated interest rate cuts, which are now already priced into the market. However, the current general conditions such as a good labor market, high wage pressure and falling financing costs do not indicate a further fall in interest rates. This could lead to a rude awakening in the markets.

Risk two concerns the US economy, whose mild recession could be more severe than expected. Current investor sentiment is based on a best-case scenario, but historically this is the exception. Warning signs, such as rising interest payments from private households, indicate possible effects on the economy.

The third risk is that stocks in the US are no longer more attractive than bonds because stock returns do not correspond to risk-free market returns. This could lead to institutional investors shifting more of their assets into bonds.

The fourth risk concerns investors who rely too narrowly on US tech and artificial intelligence. The high valuation and the need to maintain high business numbers could create a bubble that could burst.

Last but not least, there is a risk of political tensions that could bring the recovery to an abrupt end. The current neglect of geopolitical conflicts could lead to unexpected events that have a major impact on the markets.

It is important not to allow yourself to be infected by the current euphoria, to continue investing calmly and consistently and to diversify your portfolio broadly. This reduces the risk of loss if previously ignored risks become aware.

It is also advisable to split the portfolio and rebalance after the rally in US tech stocks and other high-risk areas to minimize the risk of losses.

It is important to take the possible risks into account and not allow yourself to be infected by the general euphoria. Broad diversification and thorough rebalancing of the portfolio can help prevent unpleasant surprises and invest successfully in the long term.