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Geopolitics and the Impact on our Economy

Geopolitics and the Impact on our Economy

May 23, 2024

The despairing situation in Israel and Palestine has shocked the world. We feel the deepest sorrow for all the lives lost and witness the continually rising death toll in anguish. As of May 10, 2024, over 35,000 people have been killed since the war began on October 7, 2023.

The horrors of the Israel-Hamas war have all of humanity’s attention, and along with the shock and sadness occupying our thoughts, come fear, worry, and uncertainty. This turns our thoughts to our own families’ well-being and wondering what the impact will be here, on our economy and our portfolios.

At this age of financial promise and brilliant technology, it can feel at odds when the market teeters; the phenomenon of life exhibits an endless amount of interconnections; the financial world is no exception. Economic growth is often connected to poverty reduction and the flourishing of society; in turn, intense political events can affect the economy by creating market uncertainty, volatility, and inflation.

This war will have some impact on our economy, as geopolitics always has; it is no surprise. Since we’ve seen geopolitical and global turmoil before, we can educate ourselves and you to be prepared for the expected outcome, alleviating stress and worry. We would like to address the questions that you, as an investor, may have about your portfolio. Are short-term investments a good idea right now? When global tensions are high, there is always a risk investing in the market. While in an economic downturn, especially with the end not in clear sight, you are in all probability looking at insufficient time for a stable and good turnaround. Should I sell any of my assets right now? Generally, the best path for you to follow is to stick to your plan to come out victorious on the other end. Long-term goals are very important to keep in mind regarding investments because the longer your money is in play, the greater the opportunity for compounding and growth. Will I see a drop in the total value of my portfolio? Most likely yes, temporarily–but don’t act on that initial feeling of panic; based on historical data, the total value is expected to make a U-turn and rise again as time passes. MorningStar flashes a light for us at the end of this tunnel, informing us they expect that “the rate of economic growth will slow…for the next three quarters all the way until the third quarter of this year before then starting to reaccelerate.” Will the negative impact on the market last indefinitely? You can be reassured that market setbacks during (and following) a serious geopolitical event are typically temporary and numbers will bounce back not too long afterwards AND continue on an upward trend. You can reference this data table from Reuters highlighting market trends of S&P 500 following past geopolitical crises for up to a year and see the overall positive trend. Is there anything I should be doing right now regarding my investments? Yes–exercise patience and discipline and stick to your plan. Remain focused on your family, yourself, and your financial picture.

It is normal to be concerned about what will happen to the economy. Fortunately, we can expect the market to come out on top with time. As is explored in this article from Forbes looking at the history of petroleum economics, gas rate expectations are up in the air, which keeps things uncertain for the time being. Current inflation information and statistics can be found in this article from Forbes, which informs us that while “consumer price index inflation has come in above expectations for two consecutive months now,” the chief investment officer at Regan Capital expects “the Federal Reserve to cut interest rates two or three times in 2024”. The article also reports that “S&P 500 companies are on track to report their second consecutive quarter of positive year-overyear earnings growth.” Morningstar gives us yet another lifeline of positivity as it informs us in their article on 2024 inflation expectations that inflation is expected to decrease in 2024. 

While we can’t predict every possible outcome or promise the future, it remains clear that with time, sometimes more than hoped and sometimes less than expected, things will typically balance out and then give way to times of growth and success. Keep a level head and stay positive as you confidently steer your ship through these waters.

Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. WestPac Wealth Partners LLC is not an affiliate or subsidiary of PAS or Guardian. Insurance products offered through WestPac Wealth Partners and Insurance Services, LLC, a DBA of WestPac Wealth Partners, LLC. CA Insurance License #0H47704 | Guardian, its subsidiaries, agents, and employees do not
provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. | 2024-174985 Exp. 05/26 | Past performance is not a guarantee of future results. Indices are unmanaged and one cannot invest directly in an index. All investments contain risk and may lose value. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Data and rates used were indicative of market conditions as of the date shown. Opinions, estimates, forecasts and statements of financial market trends are based on current market conditions and are subject to change without notice. |  References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer, or recommendation to purchase or sell a security. This material is intended for general use. By providing this content Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation, or to otherwise act in a fiduciary capacity.