THELooking ahead to 2022, it is important that advisors understand and plan in advance the geopolitical landscape and the investment risks it could present in the short, medium and long term. Understanding geopolitical risks going forward will enable advisors to inform and educate their clients and help them manage portfolio strategies in a meaningful and risk-aware manner.
IndexIQ recently sponsored a webcast, The Geopolitical Risks That Could Potentially Impact Portfolios in 2022, starring John Sitilides, Director of Trilogy Advisors, and Lauren Goodwin, Portfolio Strategist for New York Life Investments, and moderated by Dave Nadig, CIO and Director of Research. for ETF trends and the ETF database.
Topics covered included the United States’ security alliance with the United Kingdom and Australia in the Indo-Pacific region, the fallout between the United States and France and the role of the EU in geopolitics. , China’s desire to be a world leader and the impacts of these choices. around the world, and the withdrawal of the United States from Afghanistan and the aftershocks that followed.
The political climate in the United States under the Biden administration, which overturned some policies of the Trump era, left other strategies in place.
With the collapse of relations between Australia and China, a new alliance was formed. The United States, United Kingdom and Australia have a new military alliance in the Pacific, as well as an agreement to create a new base and request the United States Marines to rotate a task force of 2,000 in Australia.
At the same time, the Quadrilateral Security Dialogue (QUAD) alliance of the United States, Australia, Japan and India officially struck an agreement that would work to support each country and offer aid, as well. as to help enforce maritime domains at a time when China is aggressively pushing for external territories. In the middle of it all is Taiwan, the world leader in microchips, which has created and deployed long-range, deep-strike missiles aimed at deterring a Chinese invasion.
The end of the war in Afghanistan and the withdrawal of troops led to the collapse of the Afghan government and plunged one of the regions richest in mineral deposits into instability. The abrupt departure of American troops also left behind arsenals of advanced weapons and allowed thousands of prisoners to break free again.
The world scene is in the grip of geopolitical turmoil; see the resurgence of the jihadist movement, Russian interference and militarization of oil and gas domination in the EU, tensions with China and instability caused by Iran.
Portfolios could be subject to many risks over the next year, and there are several ways to counter investor concerns. Two examples of investment approaches include dealing with the risk of currency volatility linked to geopolitical risk with a 50% currency hedging strategy, and dealing with concerns that risks are pervasive and risk management is complicated. with a strategy that emphasizes ESG.
Financial advisors who are interested in learning more about this topic can watch the on-demand webcast here.
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