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Oliver's Insights - Tariffs, trump, North Korea and other global political risks in the Year of the Dog

Shane Oliver, Head of Investment Strategy and Chief Economist.

The attached note takes a look at why geopolitical issues are more important for investors these days and what to look out for this year. The key points are as follows:

 

  • Geopolitical issues generate much interest as dinner party conversations but don't necessarily have a significant impact on markets, apart from a bit of noise.
  • But given a backlash against economic rationalist policies, the declining relative power of the US and the ability of social media to allow us to make our own reality, geopolitical risks are higher than they used to be.
  • Key issues to watch this year are: around President Trump given the mid-term elections, particularly on tariffs (notably in relation to China) and the Mueller inquiry; the Eurozone after the messy Italian election and the likelihood that Merkel and Macron will work to build a stronger Europe; North Korea; and China.
  • Given the difficulties in trying to predict geopolitical shocks and their impact it often makes more sense for investors to focus on the investment opportunities they throw up, rather than taking long term shelter from them in low returning cash.




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