Managing Geopolitical Risk in Investment Decisions

Managing Geopolitical Risk in Investment Decisions

October 2015

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Jack Malvey examines the major geopolitical events of the past century along with associated market reactions, current geopolitical risks and the impact on investment decision-making in light of those rising risks.

Geopolitical risks clearly have risen in the early 21st century. A modified World Order, yet to be fully defined, looms. Classic capitalism has spawned numerous offspring with varying political and economic characteristics. Especially in an era of quickening technological change, ideological and theological differences breed disagreements among some nations. Although not necessarily a core competency for many capital market practitioners, strategic and tactical portfolio management must reckon with geopolitical risk in its decision-making process.

This report defines geopolitical risk in a broad manner, lists major geopolitical events over the past century along with associated market reactions, looks at the strategic and current menu of geopolitical risks, addresses investment decision-making in light of such evolving geopolitical risks, and posits potential high impact and high-likelihood geopolitical risk developments over the next decade to 2025.

 

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Virtually nothing can slam an economic outlook and investment portfolio more suddenly than adverse and often largely unpredictable geopolitical developments.

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