Investors are bracing for a turbulent year as market volatility surges, driven by policy changes from the Trump administration and the removal of fact-checking on social media platforms, warns behavioural finance expert Oxford Risk.
Knee-jerk reactions to market swings could cost investors an average of 3% annually in returns, with losses likely to rise amid a “perfect storm” of emotional decision-making and misinformation, shared the analysts.
Emotional mistakes, such as chasing popular investment themes or overtrading, are expected to increase as volatility heightens, according to the analysis. These behaviours often lead investors to allocate funds to assets they don’t fully understand, further derailing long-term financial plans. The experts have also highlighted the need for behaviourally-driven financial advice to mitigate such risks, warning that without effective support, investors face poor decision-making and suboptimal outcomes.
Market analysts predicted that volatility will focus on actual events and announced policies, including trade tariffs, inflation concerns, recession fears, and central bank decisions. However, the rise of misinformation, fuelled by Meta’s removal of fact-checking on platforms like Facebook, Instagram, and Threads, as well as similar practices on X, is expected to worsen the challenge. This could lead to a surge in speculative trading, particularly in cryptocurrencies, which are expected to gain traction under looser regulatory policies from the US administration.
“Social media speculation will become more of an issue, Oxford Risk believes, with the scrapping of fact-checking by Meta on its Facebook, Instagram, and Threads sites in the US in line with similar policies on X leading to a rise in misinformation and disinformation about investment,” stated the report.
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Investors may be particularly vulnerable to the hype around digital assets such as Bitcoin, cautioned the researchers. Many are likely to jump into cryptocurrency trading without fully understanding the risks, setting the stage for financial missteps.
Advisers and wealth managers, according to Oxford Risk, are crucial in helping clients navigate these turbulent conditions. However, they must adopt advanced technology to provide personalised support during periods of heightened volatility. The firm’s white paper, Behavioural Engagement Technology: Using technology to understand, map, and improve engagement in personal finance, outlines how AI and machine learning can enhance client engagement and boost financial outcomes.
Oxford Risk’s proprietary algorithms, which rank products and communications based on client suitability, are designed to help financial firms address behavioural biases and improve decision-making. By leveraging technology and behavioural science, advisers can tailor services to client needs more efficiently, improving communication and growing assets under management by 10% or more, the firm claimed.
James Pereira-Stubbs, chief client officer at Oxford Risk said: “Volatility is part of investing and people need to be able to tune out the noise, focus on their long-term financial plans and not rush to buy or sell. However, the reality is that many cannot do so when markets are more unstable.
It is going to be increasingly difficult in the year ahead with a real risk to investors as markets swing wildly in reaction to major policy changes from the Trump administration, while issues such as inflation and interest rates remain uncertain. The end of fact-checking social media in the US will add to volatility with people tempted to invest in the latest fads and a greater focus on cryptocurrency and digital assets.
Advisers can address these issues for clients but they need technology support so they can provide hyper-personalised engagement that helps people get invested, stay invested, and make better decisions throughout their journey. By addressing individual needs and behaviours, financial firms can turn missed opportunities into better outcomes for investors.”
