deVere's Elliott: Stock Volatility 'Likely to Increase in 2015'

The CBOE Volatility Index, which measures expected volatility in the S&P 500 index, has more than doubled since hitting a seven-year low in July, and the move probably isn't over yet, warns
Tom Elliott, international investment strategist at financial advisory firm deVere Group.

"Investors who are sensitive to market volatility may need to increase their exposure to defensive sectors and stock markets, because stock market volatility is likely to increase in 2015," he writes in a commentary provided to Moneynews.

"The uncertainty over the ongoing development of the euro project and Japan’s massive fiscal and monetary expansion represent risks for investors."

Regulation is a major problem, Elliott says. "A wave of post-credit crunch financial sector regulation, most notably the American 2010 Dodd-Frank Act, have caused investment banks to allocate less capital to market-making, in both stock and bond markets," he explains.

"As a result financial markets have become less liquid, and as the October 'flash crash' demonstrated, more susceptible to panics."

Meanwhile, Jim Paulsen, chief investment strategist at Wells Capital Management, predicts U.S. stocks will stay steady or slide next year.

"There's some really strong Wall Street consensus themes right now," Paulsen tells CNBC, and he sees holes in all of them.

"One of them is 'the U.S. is the place to be.' Another one is 'the dollar is only going to go up.' The third one is 'rates can stay lower for longer,'" he notes. "I think 2015 might resolve in disappointing every one of those themes. I would tilt against them in portfolios."

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