However, in an environment where national security and resilience is prioritised over economic efficiency, we are less likely to continue to reap these benefits.
The value of world trade has plateaued in the last decade, after several decades of constant growth.
The stagnation of world trade in part reflects the rising tensions and division in the global order.
Countries are increasingly using protectionist measures, such as tariffs, sanctions, or export restrictions, to safeguard their interests and security, or more overtly favouring local product.
Here are four tips for investing during heightened geopolitical tensions:
- Diversify for reduced investment risk – spread your investments across asset classes, sectors, geographies and individual holdings. Diversifying helps minimise the impact of isolated events or factors on your portfolio performance.
- Prepare for increased volatility - along with ensuring your asset allocation is appropriate for your goals and objectives, this also has a psychological aspect. Markets don’t move in a linear direction, so anticipate periods of volatility and plan accordingly. Maintain a long-term perspective to resist reacting to short-term fluctuations, and see volatility as an opportunity to rebalance your portfolio.
- Position yourself for high inflation - whilst inflation is unlikely to be as high as the last couple of years, it’s hard to envisage a scenario where it sits comfortably at the midpoint of central banks’ target ranges for extended periods. Investors should look for assets that can provide some protection against rising prices and costs.
- Seek expert advice – consult an expert to ensure your approach is suitable for your overall position and risk appetite. Adjusting your portfolio in response to changing market conditions and personal circumstances will help preserve your investments for the long term.
It’s not all doom and gloom.
As an export nation, New Zealand is reliant on global trade for our prosperity.
While the instability and increased conflict is not ideal economically, over the longer term our physical isolation and food security offers considerable benefits.
As a country we need to be innovative to navigate through the turbulence and take advantage of opportunities.
As an investor, maintaining a diversified approach will minimise the impact of external shocks and put you in the best possible position to achieve your investment goals.
DISCLAIMER: This research has been prepared by Jarden Wealth Limited (Jarden) which holds a licence issued by the Financial Markets Authority to provide a financial advice service. The information in this research solely relates to the companies and investment opportunities specified within. For a full publicly available disclosure statement, see https://www.jarden.co.nz/our-services/wealth-management/financial-advice-provider-disclosure-statement/.
