Geopolitical events are inherently uncertain and highly distinctive in nature. Consequently, any market response tends to vary significantly from one event to another. Despite the current military skirmish in the Middle East and those preceding throughout the years or the on-going conflict in the Ukraine can possess distinct characteristics with some lasting a few days, some enduring for several months, and others unresolved for many years. Moreover, prognosticating the probable impact on financial markets is exceedingly challenging. This holds true for geopolitical events given the uniqueness of each occurrence, rendering the consequences difficult to forecast. Many such events affect regions with underdeveloped financial markets, economic markets of varying scale, and minimal global trade connectivity. As a result, the market and macro effects are often typically relatively minor.
Figure 1 illustrates prior periods when geopolitical risk was elevated.
The question that begs to be asked is how did markets the traditional North American investors react over a year period react when these events were triggered? Figure 2 below clearly shows that there are immediate reactions, and they are certainly dependent on the size and scale of the region involved.
Figure 2 illustrates how corresponding markets reacted to these geopolitical events.
The biggest takeaway for any concerned investor is the employment and scale of the team stewarding one’s wealth in an ever-changing global economy. Exponent is a firm that has navigated each of these disruptive global events for their clientele with well-engineered actively managed portfolios. The art of making money is not making it but keeping it.
A discussion about wealth management that ignores this element of our evolving world leaves a vital piece of the puzzle out of stewarding one’s legacy.
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