How Geopolitics Impact Your Portfolio

Markets reflect the economic and political landscapes. Macro and microeconomic factors can influence the path of least resistance of prices of assets across all asset classes. Domestic and geopolitical events can equally impact price trends.

In early 2022, markets face escalating inflationary pressures in the US and worldwide. The global pandemic has caused supply chain bottlenecks, labor shortages, and other issues that will cause COVID-19’s financial legacy to last for years, if not decades. The levels of central bank liquidity and government stimulus since early 2020 have lit an inflationary fuse that will be challenging to extinguish.

Meanwhile, in early 2022, the world faces a host of potential geopolitical problems that could cause sudden and violent moves in many financial and raw material markets. While the stock market is focused on inflation and economics, it could be politics that blindside investors and traders over the coming months.

China - US relations have deteriorated

• Trade issues continue to divide the world’s two leading economies
• The US opposes China’s expansionary desires in Taiwan and the South China Sea
• China resents US interference with its domestic human rights issues
  
  

Russia - US relations are even worse

• The US and NATO have warned Russia over any incursions into Ukraine
• Russian troops have amassed at the Ukraine border
• President Putin makes no secret of his desire to reassemble the USSR block of countries under the Russian umbrella
• The potential for hostilities between the US and Russia is at the highest level in decades
• Last week’s attempt at a diplomatic resolution seems to have gone nowhere
   

Iran remains a threat in the Middle East

• Iran continues to enrich uranium at its nuclear facilities
• There is no nuclear non-proliferation agreement in place
• Iran continues to call for the destruction of the US and Israel
• Iran and Saudi Arabia remain mortal enemies in the Middle East
  
  

North Korea has been testing missiles

• Kim Jung Un has been testing rockets, threatening South Korea and Japan
• US presence in South Korea and Asia present another potential flashpoint between the US and China
• North Korea continues to provoke the Biden administration
  
  

The most extreme market volatility tends to come from the most unexpected events

• The global pandemic that came from out of the blue is the perfect example
• The financial world is focused on the Fed, inflation, interest rates
• Price action in markets reflect the economic and political landscapes
• Keep your eyes open- Geopolitical events could ignite significant market volatility over the coming weeks and months

Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!