U.S. investors have their sights set on a big presidential election just over the horizon. With ramifications for many aspects of American life, including markets, it has investors’ and advisors’ rapt attention. At the same time, however, focusing on the presidential election may distract investors from other geopolitical risks abroad. Those risks could have a bigger impact than the election does, with the variety and number of risks speaking to an active investing outlook.
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What kind of risks are investors missing abroad? While the situation in the Middle East remains a serious one, it’s not the only risk to consider. China recently completed military exercises around Taiwan, for example. While in years past the prospect of a dispute over sovereignty and territory breaking out seemed almost outlandish, Russia’s invasion of Ukraine has put that prospect back on the map for many. A China invasion of Taiwan would severely destabilize global markets.
Geopolitical Risks Abound for Investors
Speaking of Russia, while that war has settled into a painful stasis for both countries, it could spiral into something worse. Asymmetrical warfare like cyber attacks could appeal to Russia as a means to destabilize Ukraine’s Western and Central European allies.
Chief among those risks looming over world markets, however, is a growing conflagration in the Middle East. Should Iran and Israel, potentially with U.S. backing, see further military exchanges, Iran could retaliate by choking trade routes through the crucial Strait of Hormuz. Such a scenario would cause major damage to global energy supplies.
With those factors looming in addition to the election, active investing could appeal. Investors are reshuffling portfolios, and active ETFs could provide a set of adaptable, flexible strategies. Their managers can adjust quickly to big events, while also providing long term value through bottom-up stock selection powered by fundamental research.
The T. Rowe Price International Equity ETF (TOUS ) presents one option. It combines the flexibility of active investing with research-backed exposure to international equities. For those looking to adjust their foreign exposure with a bit more adaptability for geopolitical risks, an ETF like TOUS may appeal.
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