Smart Investment Choices for the Current Geopolitical Situation

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Smart Investment Choices for the Current Geopolitical Situation

Tanmoy Roy Dec 03, 2015

After the recent attacks in Paris on November 13, which saw 120 people killed, the Western world has come to realize that they may not be immune to the problem anymore. The U.S.’s “not our problem” policy worked for a few years but seems to have reached an expiry date. At the time of writing, there are coalition/coordination talks between the unlikeliest superpowers: the U.S. and Russia. Terrorism has major political and economical consequences. In this article, we will explore what those implications might be and what investors can do to counter the risk.

Why You Need to Take Action Now

Clearly, global leaders are preparing to take action together. This is a world-shaping moment in front of us as they feel strongly about changing the trajectory of terrorist attacks, which have been on the rise since 2010.

Global Deaths From Terrorism

What Are the Economic Implications of Action Against ISIS?

Below, we highlight a few potential events that might take place in the next 12 months and what investors can do about them:

This means technology, personnel, research, operations and maintenance. Already, “war”-related stocks are starting to pick up steam. This may not be a bad time to go long on some of these stocks or mutual funds like FSDAX.

Paris Attacks Graph

Oil prices traditionally spike on fears of supply disruptions caused by military conflict. Oil prices have bounced back more than 4% since the Paris attacks. The core fundamentals of oil supply and demand remains weak and the rally probably won’t last long. However, if this turns out to be an aggressively involved war (higher demand), and the airstrikes keep damaging ISIS’s oil business, prices might go up in the short to medium term. Examples of oil mutual funds are UNG and USO.

Crude Oil Prices

The industry is expected to take a hit due to the fear and uncertainty that has prevailed since the Paris attacks. Stocks like InterContinental Hotels, Accor, Eurotunnel, Air France-KLM, and Ryanair have all fallen since the attacks. If there are more speculative or real attacks on France or the United Kingdom, these stocks are going to fall further. Investors with exposure to these areas may want to reduce their weightings or enter into short positions to hedge against the risks.

The Bottom Line

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