The View | What should investors do in times of geopolitical uncertainty? Don’t worry about it
The best action for investors during extreme geopolitical crisis is to do nothing. Why change your strategy if the chance of the crisis is low? If it’s extreme enough, your portfolio should be the last thing you need on your mind.
“If China is not going to solve North Korea, we will.” 2nd April 2017.
“North Korea best not make any more threats … They will be met with fire and fury like the world has never seen.” -- 8th August 2017, US President Donald Trump
At midnight on 2nd August 1990, the Bahrain representative of the investment company that I worked for heard Tornado strike jets flying overhead fast and low.
Being a military man, he could tell the difference between a loaded bomber and a training flight. He telephoned the Tokyo office, the only one opened at that time, saying “the Gulf War’s started.”
The message was lost under some papers and not found until lunchtime. By then, the Tokyo stock market was up. We would have sold if we had received the news in time.
Baron Nathan Rothschild said in 1810 that one should “buy on the sound of cannons, sell on trumpets”. He had learned this mantra from the Napoleonic Wars, when conflicts were frequent. Markets fall on threats of war, so buy; and then the peace rally provides an opportunity to sell. Repeat. Skirmishes are trading opportunities.
