ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Global Diversification
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Megatrends
    • Modern Alpha
    • Multi-Asset
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About Us
    • Swag Store
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Portfolio Strategies Channel
  2. How Will Geopolitical Tensions Influence Markets?
Portfolio Strategies Channel
Share

How Will Geopolitical Tensions Influence Markets?

Elle CarusoFeb 16, 2022
2022-02-16

Most geopolitical issues do not have an impact on markets beyond short-term volatility, but the current situation in Russia and Ukraine may have more substantial implications.

Last Friday, the market saw increased volatility in response to the White House announcement that a Russian invasion of Ukraine appeared to be imminent. Geopolitical events could add significant fuel to the inflationary pressures that central banks can’t really solve but might damage their respective economies trying, Kristina Hooper, chief global market strategist at Invesco, writes in an Invesco insight.

The ongoing geopolitical issue is unique because of the potential impact on the price of commodities at a time when inflation is driving central bank actions.

“Conventional wisdom suggests that the U.S. and allies would not engage in a ground war if Russia invades Ukraine, but instead would impose crippling economic sanctions on Russia, and we subscribe to that base case,” Hooper says.

Russia is a major producer of oil and other commodities, and thus economic sanctions are likely to drive up prices at a time when the last thing the U.S. or other developed countries need is more inflationary pressures. Most directly affected would be the European Union due to its heavy reliance on Russian energy products, but sanctions would drive up energy prices elsewhere as well, according to Hooper.

In addition, Russia and Ukraine are major wheat exporters, and Ukraine is a major corn exporter, so food prices could be driven higher as well. Russia is also the world’s largest exporter of palladium, so there is the potential for more auto supply chain disruptions given that palladium is used in catalytic converters, adding to auto supply chain disruptions that don’t appear likely to abate quickly, given Toyota and Honda’s recent guidance that the semiconductor shortage in the auto industry doesn’t seem to be ending soon, according to Hooper.

Hooper also references the “Freedom Convoy” protestors and blockade on the U.S.-Canada border at the Ambassador Bridge, adding to supply chain disruptions and potentially increasing costs. The movement has gone global and is popping up in other developed countries such as Belgium and France.

Investors looking to reposition their portfolios in the face of high inflation and geopolitical pressures should consider an equal-weight strategy, such as the Invesco S&P 500 Equal Weight ETF (RSP B+).

Opting for an equal-weight index, as opposed to a market cap-weighted approach, can provide diversification benefits and reduce concentration risk by weighting each constituent company equally, so that a small group of companies does not have an outsized impact on the index.

For more news, information, and strategy, visit the Portfolio Strategies Channel.

Loading Articles...
Help & Info
  • Contact Us
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X