5 key geopolitical risks for investors
International waters are starting to heat up, as multiple conflicts are testing the U.S. and global markets at once. While the countries (and regions) below may look like the usual suspects, the conflicts are new and the stakes are higher. Here are 5 areas that we think investors need to keep a close eye on moving forward.
Venezuela – Developed nations around the world, including the U.S., have recognized opposition leader Juan Guaido as the legitimate President of Venezuela, while Russia and China continue to support current President Nicolás Maduro’s brute regime. To date, the opposition to Maduro has had little success moving forward, even with the “on paper” support of the developed world. As the conflict continues, Venezuela’s economy has tumbled into near Depression.
What we think investors need to watch: Any move by the Maduro government to arrest Guaido or severely thwart his efforts may result in the U.S. and other nations stepping in with military force to confront the situation. Global markets, historically, have tended to correct for longer periods when the U.S intervenes with regime change operations versus limited military strikes.
Stay Calm During Market Chaos!
Investing is emotional. A bull market can be as exhilarating as a bear market is terrifying (ask any investor who went through 2008). But in our view staying invested is key – since 1926, investors who remained in the market over the long-term came out ahead 99% of the time.1
It’s important to maintain perspective during rough periods so you don’t overreact. If you have $500,000 or more to invest, get our free guide, How To Avoid Emotional Investing. It provides our advice, based on decades of experience, to help you navigate through turbulent times.
Download Our Guide, How To Avoid Emotional Investing.2
Iran – the Iran situation has been tenuous for years, but since the U.S. withdrawal from the nuclear deal the stability in the region has arguably worsened. Issues came to a head in the middle of May when Iran announced it would abandon its commitments under the nuclear deal and began escalating movements of Iranian-backed forces, including in Saudi Arabia. The United States responded by posturing for escalation in deploying a carrier strike group to the Middle East and removing diplomats from the embassy, while also declining to allow Iran’s oil customers to continue making purchases.
What we think investors need to watch:As tensions rise in the Middle East, investors should keep an eye on oil prices that may result from supply disruptions.
Europe – Brexit headlines have faded as the U.K. successfully petitioned for an extension through October to leave the European Union. But kicking the can down the road doesn’t mean the can goes away, and the uncertainty is being coupled with a slew of elections taking place this summer that could have wide-ranging implications for leadership across Europe. Nationalist parties that are largely “euroskeptic” have been gaining seats in Italy, Germany, and Spain, and the subsequent weakening of governing coalitions could leave Europe effectively leaderless in the back half of the year.
What we think investors need to watch:Political stability will be key to Europe avoiding recession in the second half of the year.
China – we have written about China many times over in this space, but usually with an optimistic tone about a trade deal seeming like it could be in the offing. That possibility shifted considerably to the negative in mid-May, when talks between the two countries effectively broke down and new rounds of tariffs were put in place. What’s more, the U.S. executive order restricting business dealings with Huawei seems like the U.S. doubling down on its leverage to get China to agree to a deal, with China’s response being to dig their heels deeper into nationalistic resistance.
What we think investors need to watch:Failure to reach a deal in June could come at a critical time for the global economy, as growth already faces a more uphill battle and corporations may be more reluctant to invest.
North Korea – the North Korean regime is back at it, launching its first missile test since late 2017.3 The missile test was just short-range, which is less of an immediate concern than if they were testing intercontinental-range missiles. Even still, provocations from North Korea can add to already rising tensions as described above across the globe, perhaps ultimately contributing to greater market volatility.
What we think investors need to watch:North Korea seems to want out from under global sanctions, so keep an eye on additional moves designed to draw attention.
No matter how these stories unfold, it is impossible to control the highs and lows of market. But there are ways you can manage the highs and lows of your own emotions and stay focused on your long-term goals.
In our view, staying invested is key – since 1926, investors who remained in the market over the long-term came out ahead 99% of the time.4
If you have $500,000 or more to invest, get our free guide, How To Avoid Emotional Investing.5 It provides our advice, based on decades of experience, to help you navigate through turbulent times.
2 ZIM may amend or rescind the “How To Avoid Emotional Investing” guide for any reason and at ZIM’s discretion.
3 May 13, 2019, Charles Schwab. https://www.schwab.com/resource-center/insights/content/geopolitics-examining-top-five-risks
4 Source: Morningstar Direct, 12/31/18. Analysis is performed by looking at the rolling monthly return periods for the S&P 500 Index over the 1-month, 3-month, 1-year, 5-year, 10-year and 15-year to determine if the total return of the index was positive. Respective percentages were calculated off of the number of periods that the index was positive out of the entire history of the data set from 1926-2018.
5 ZIM may amend or rescind the “How To Avoid Emotional Investing” guide for any reason and at ZIM’s discretion.
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