Is Geopolitics The Big Market Risk We're Missing?

Authored by Bill Blain via,

“Address all your skill and the valour of my soldiers to exterminate the treacherous English and walk all over General French’s contemptible little army…”

Markets are up and down, and the noise is focused on Covid, Central Banks, Inflation and Tech stocks. But… perhaps the big risks lie elsewhere. Where are Geopolitics headed? Faceoffs in Ukraine and Taiwan have the potential to completely derail markets.

Looking at bond and stock prices there is a rising sense markets might finally have peaked. Some of the conviction underlying strength, the likely support of central banks, and the buy-the-dip games of last year, feel like it’s evaporated. There are plenty of opinions and concerns about the inflation/stagflation threat, worries about globalisation and what the pandemic might or might not still do to us. It’s easy to figure why markets are nervous today, but they might just as well be ecstatic tomorrow if these fears and tensions subside – which will likely prove the case when Covid is beaten!

As always, I take the middle road: “Things are never as bad as you fear, but seldom as good as you hope”. Now is a time for patience – waiting the current misty market front to pass through, and for the path ahead to become clearer, which post pandemic (which I hope is sooner than we expect) the situation may look very good again.

But, But and But again…. When things look good… look for bad…

One aspect that doesn’t seem to be getting quite as much focus and attention as it probably should is Geopolitics – and the specific risks global tension zones could suddenly turn hot, specifically Taiwan and Ukraine. Speaking to clients yesterday – everyone had a multiplicity of views on stocks, covid, credit, bonds and inflation, but no one was really talking about the destabilisation risks of global tension and...

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