It is hard to believe that in today's so-called developed world, we continue to see how problems are solved with violence and bloodshed, not only nationally but also internationally, with recurring wars.
Modern politicians' lack of negotiating skills or willingness to engage in diplomacy has led us to a worrying situation, with 56 conflicts involving 92 countries, the most we have seen since World War II.
Some conspiracy theorists even point fingers at the largest arms manufacturers, suggesting they might be pushing for more action on the ground to secure new contracts and boost their profits.
Does this mean the geopolitical situation won't improve anytime soon?
It seems so. When things start to calm down in one hot spot, they flare up in another. And well, if it doesn't affect the world economy, as happened with the Russian-Ukrainian conflict.
Given this, it is prudent to have a backup plan and diversify your portfolio with gold, bonds, and cash. Also, keep in mind who stands to gain from these tensions and who stands to lose.
Take the ongoing war in Eastern Europe, for instance. It was clear from the start that new sanctions or disruptions in the energy market, particularly gas and oil, would drive prices up significantly.
What if common sense returns and tensions begin to ease?
Although it is still too early to tell, mainly until before the U.S. elections, there is a growing sense that in the Russia-Ukraine and Israel-Hamas conflicts, we may be able to reach some kind of agreement.
If that happens, it would boost both domestic and international stock markets, including, of course, the S&P 500. Conversely, as the situation stabilizes, we could see a correction in commodity prices.
Ending conflicts usually lowers uncertainty and risk, which helps boost investment and economic stability. However, even if the Russia conflict ends, it’s unlikely that Russia will see much new international investment.
Where could the next geopolitical tension arise?
In years, what has worried investors most has been a direct confrontation between China and the US and its allies, which could lead to conflict or even military action. However, the situation could develop differently.
Instead of a direct confrontation, we could see an intensification of indirect conflicts, such as trade wars. For example, Canada, Europe, and the United States are already applying new tariffs on Chinese products.
This shift could signal a deeper and more protracted period of economic and political tension…