The three fears stalking investors right now – but why calm heads will prevail

Markets often thrive on optimism, but lately they’ve been shadowed by unease. Three themes dominate investor anxiety right now; each powerful enough on its own to shake confidence, but together creating a sense of fragility that’s hard to ignore.

Words by Nigel Green, deVere Group CEO and founder

Credit markets are showing new cracks

The first is the growing tension in parts of the US credit market. For months, signs of stress have been building under the surface in leveraged loans, private credit, and securitised products that many thought had been tamed after 2008.

Now, with several high-profile corporate blow-ups making headlines, the question investors are asking is whether these are isolated events or the first cracks in a broader structure.

No one is seriously predicting another Lehman Brothers moment. The regulatory buffers and capital requirements built over the past 15 years are much stronger.

However, complexity has crept back in through the side door. The so-called ‘shadow banking’ system, comprising of hedge funds, private equity firms, and private credit managers, has become a major lender to companies that no longer rely on traditional banks. Many of these firms operate with opaque structures, high leverage, and little transparency.

It’s within this ecosystem that some of the most creative, and therefore riskiest, financing has occurred.

The collapse of First Brands Group, for instance, drew attention to the tangled web of debt arrangements linking non-bank lenders and Wall Street institutions.

When markets are calm, these structures work beautifully. When stress rises, liquidity can vanish faster than investors anticipate. The concern now is not systemic contagion in the old-fashioned sense, but a modern version, that’s to say a network of cross-exposures that could tighten credit across sectors just as growth slows.

The AI boom is testing investors’ restraint

The second anxiety sits at the opposite end of the optimism spectrum: the artificial intelligence boom.

No one doubts that AI will transform productivity, reshape industries, and create new wealth. But as with every transformative technology, enthusiasm can spill over into excess.

There’s growing chatter that capital is being deployed faster than viable business models can absorb it. When valuations for AI-linked stocks and start-ups soar to levels untethered from revenue reality, it starts to feel eerily reminiscent of the late 1990s dot-com bubble. Then, too, investors were captivated by the promise of a new era, only to discover that many of the early winners were built on unsustainable hype.

Much of today’s AI investment is financed through complex arrangements, such as vendor financing, convertible structures, and private capital from the same shadow-banking universe now showing signs of strain.

If those funding channels tighten, the AI sector could experience a sudden liquidity squeeze. The tech itself will endure, but the capital supporting it may not be as patient as its champions believe.

These two concerns – credit stress and AI exuberance – are linked by a common thread: they both rely on cheap money and high confidence. The more interest rates fluctuate and political risk rises, the more fragile those foundations become.

Trade policy uncertainty returns

Which brings us to the third and most unpredictable of the current investor fears: trade policy.

President Trump’s renewed tariff skirmish with China last week reminded markets that geopolitics remains a wild card. The abrupt imposition of new duties, followed by an equally abrupt softening of tone, illustrates the inconsistency that businesses find so destabilising.

The fact that the White House appeared to reverse course after being reminded of America’s reliance on Chinese rare-earth metals – essential to defence technology such as F-35 jets – underscores how intertwined the two economies remain.

Tariffs rarely achieve their intended outcomes. They raise input costs, distort supply chains, and ultimately feed inflation.

Yet they retain political appeal, especially in an election cycle when protecting domestic industry is an easy applause line. This, for investors, means ongoing volatility in global trade flows, periodic disruption to manufacturing and tech supply chains, and persistent uncertainty about corporate earnings forecasts.

The irony is that just as inflation is gradually receding and markets are looking for a stable path forward, tariff unpredictability could re-ignite cost pressures and complicate central bank policy.

Every time trade tensions flare, they ripple through commodities, currencies, and emerging-market assets, unsettling precisely those corners of the global economy that depend on steady capital flows.

Individually, any of these three issues could be managed. Together, they create an environment where confidence can turn brittle. Investors are once again reminded that financial stability rests on more than economic data, it depends on trust in systems, policies, and the judgment of those steering them.

There are, of course, reasons for optimism. The US economy remains resilient, job creation is steady, and innovation is still abundant. But prudence demands recognising that the biggest threats rarely come from the obvious places.

In 2007, it wasn’t the visible risks that triggered a crisis, it was the hidden leverage in instruments few people fully understood.

Today, the equivalent vulnerabilities may lie in the opaque reaches of private credit and AI financing, amplified by political decisions made in haste. Investors don’t need to retreat from markets, but they should be alert to where liquidity might dry up fastest and where policy unpredictability could collide with overconfidence.

In times like these, the smartest capital isn’t the most daring, it’s the most discerning. Knowing when enthusiasm turns into complacency, and when caution turns into opportunity, is the real skill. The coming months will test both.

Nigel Green is the group CEO and founder of deVere Group, an independent global financial consultancy.

The views, information, or opinions expressed in the interviews in this article are solely those of the author and do not represent the views of Stockhead.

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