Investors Becoming More Concerned About Geopolitics
Summary
TLDRThe video transcript discusses the growing significance of geopolitical risks in investment strategies, with experts like Ray Dalio emphasizing the potential for economic warfare to escalate into military conflict. The U.S. elections and the U.S.-China tensions are highlighted as critical concerns, with Dalio advocating for diversified investments in technology and asset classes. The impact of geopolitical events on global supply chains and the possibility of trade wars are also examined, illustrating the complexity and uncertainty in today's economic landscape.
Takeaways
- 🗳️ Election uncertainty can be a buying opportunity for value-minded investors and contrarians.
- 🌍 Geopolitical uncertainty is now a key feature of the economic and investment environment.
- 🇨🇳 Ray Dalio highlights US-China tensions and internal US political conflict as major risks.
- 💼 Investors should diversify their asset classes, countries, and currencies to mitigate risks.
- 🛡️ Economic warfare can precede military warfare, affecting investors with exposure to China.
- 🔍 Geopolitics is a filter for decision-making in business and investments.
- 📉 Political risks, such as election outcomes and geopolitical tensions, can impact markets.
- 🛠️ Alternatives and assets like Nvidia are seen as hedges against geopolitical risk.
- ⚠️ Clients are increasingly concerned about geopolitical risks, seeking safe financial centers and institutions.
- 🌐 Potential disruptions to supply chains are a concern due to geopolitical conflicts and trade wars.
Q & A
What is the current view on the impact of election uncertainty on investment opportunities?
-The election uncertainty has traditionally been seen as a long-term buying opportunity, especially for value-minded investors or contrarians who can capitalize on significant price fluctuations.
How does Joe Little from HSBC Asset Management view the current geopolitical uncertainty in relation to economic and investment environments?
-Joe Little suggests that the current geopolitical uncertainty is more of a feature rather than a bug in the economic and investment environment, indicating a shift from past perspectives.
What was Ray Dalio's perspective on the U.S. elections and their associated risks?
-Ray Dalio highlighted the growing tensions between Washington and Beijing as critical issues for investors, with the potential for economic warfare to escalate to military warfare.
What does Dalio suggest about the role of internal U.S. politics and its impact on the upcoming elections?
-Dalio points out that internal conflict within the U.S., especially disagreement between political parties on the election outcome, could be a significant factor, with a common unity against China emerging as a major risk.
According to Ray Dalio, what is China's position in the context of revolutionary new technology?
-Dalio considers China to be one of the few big players in revolutionary new technology and notes that Chinese assets are attractively priced.
What advice does Dalio give regarding asset diversification?
-Dalio advises investors to diversify across asset classes, countries, and currencies to mitigate risks.
What is the potential long-term implication of the one-China policy according to the transcript?
-The transcript suggests that the one-China policy may not continue forever, which could impact investors with exposure to China.
How does the transcript describe the current geopolitical landscape affecting businesses and investors?
-The transcript describes a scenario where geopolitics is a primary filter against which every investor and business is making decisions, with examples of companies like the Dutch and Japanese firms navigating complex international waters.
Outlines
🌍 Political Risks and Geopolitical Uncertainty
This paragraph discusses the long-term buying opportunities amidst political risks and election uncertainties, highlighting the view that geopolitical uncertainty has become a significant feature of the economic and investment environment. It includes insights from Joe Little of HSBC Asset Management and mentions Ray Dalio's comments on the risks posed by US-China tensions and internal US political conflicts. The paragraph also covers Dalio's stance on China’s attractive investment prospects despite potential conflicts over Taiwan.
📉 Trade Wars and Supply Chain Disruptions
This paragraph focuses on the potential disruptions to global supply chains due to rising geopolitical tensions, particularly in the South China Sea. It elaborates on the brewing trade wars, emphasizing the impact of tariffs on various goods and the significant surplus in China’s manufacturing exports. The paragraph also mentions the increasing tariffs on Chinese goods by countries like Latin America, Thailand, Saudi Arabia, South Korea, and India, and warns about the economic repercussions of these trade dynamics.
Mindmap
Keywords
💡Political Risks
💡Geopolitical Uncertainty
💡Asset Allocation
💡Economic Warfare
💡US-China Tension
💡Diversification
💡One-China Policy
💡Trade Barriers
💡Supply Chains
💡Tariffs
💡Hedging
Highlights
Election uncertainty as a long-term buying opportunity for value-minded investors and contrarians.
Geopolitical uncertainty becoming a feature rather than a bug in the economic and investment environment.
HSBC Asset Management's Joe Little discussing the rationale for considering geopolitics in asset allocation.
Ray Dalio's emphasis on the importance of U.S. elections and the growing tensions between Washington and Beijing for investors.
The potential for economic warfare to escalate into military warfare as highlighted by Dalio.
Dalio's continued bet on China as a major player in revolutionary new technology and attractively priced assets.
The necessity of diversification across asset classes, countries, and currencies according to Dalio.
The non-imminent threat of conflict over Taiwan but the potential end of the one-China policy.
The impact of American investors in China facing potential negative consequences from their government.
The increasing importance of geopolitics in investment and business decision-making.
Dutch and
Transcripts
Political risks. The election uncertainty has been a long
term buying opportunity, particularly for value minded investors or
contrarians who can take advantage of big lurches in prices.
My concern is that we've arrived at a slightly different situation today,
where geopolitical uncertainty is more of a feature of the economic and
investment environment rather than a rather than a bug.
Joe Little. They're out of HSBC Asset Management.
So he was here about an hour back, just laying out really the rationale behind
why perhaps now geopolitics is something to certainly consider as you allocate
your your assets. Yeah, And we heard that not just from
Ray Dalio, what you heard at the wealth summit yesterday when you were there as
well. But let's talk a bit more about what Ray
Dalio did say. He's talking about U.S.
elections and the risks around there. And the growing tensions between
Washington and Beijing are among the most critical issues right now for
investors. The Bridgewater Associates founder told
a Hong Kong forum that economic warfare can lead to military warfare.
For more, we're joined by our China correspondent, Jamie Lowe.
Tell us a bit more about what Dalio said.
Yeah, I mean, geopolitics, it was like at the forefront of two different
economic conferences yesterday that was held here in Hong Kong.
So Ray Dalio was talking about how internal politics, internal conflict in
the U.S. could be a very big factor, especially
with the elections coming up. If both political parties cannot agree
on the outcome of the election, except, of course, the common unity against
China. That is a major risk, especially with
the US-China tension. And he's not you know, he's still
putting his bet on China, though. He talked about how China is one of the
few countries that are very is a big player when it comes to revolutionary
new technology. And that says in China are very
attractively priced. But you have to diversify everything,
your asset classes, your countries, your currencies.
He also talked about how although a conflict with China over Taiwan is not
an imminent threat, but the one-China policy may not continue forever.
And so investors who have exposure to China could be affected.
Have a listen to what he said. Economic warfare precedes military
warfare. American investors investing in China
could experience from their government negative consequences for that.
And then there's also the worry from that that the Chinese side could make
that challenging. Yeah.
And geopolitics now is is that filter that every investor and business is kind
of making their decision against because I mean if you talk about prime example
today the Dutch and Taiwanese chipmaker plans to open up a plant in Singapore
that's all about hedging their risks. And also these so-called neutral
countries in Southeast Asia are also in the crosshairs, with the Chinese solar
maker planning to halt production in Southeast Asia because of these trade
barriers from the US as well. So it's really picking up and I think
you make a very good point, right? So you look at the assets that are doing
well. So in video that's one, you know, Joel,
Joe Little, we were talking earlier, right.
You know, this I think is a way that people are hedging against the
geopolitical risk. We were speaking with Ben Wei yesterday
out of Macquarie. Their longer term outlook allows them to
be agnostic to political cycles somewhat.
So alternatives are doing well. And you mentioned, of course, these two
conferences. I was there yesterday at the at the
Wells Forum and interestingly enough, we wanted everyone wanted to talk about
something else, but almost every panel brought up geopolitics as a key risk.
In fact, let's let's hear from some of those key voices, of course, that we
heard from our wealth summit yesterday. Geopolitical risks and the possibility
of a tail risk event has gone up dramatically.
So I believe that, yes, and as investors, we should not ignore this.
The biggest question for you as an investor is can I hedge against it?
And unfortunately, there the answer normally is no, because it's either too
expensive, you miss out on the upside. So what you can't and impossible to
time. It is impossible to time.
The only thing you can do is prepare. Do not try to predict.
Geopolitics are definitely a big concern for for all trusts, not just in Asia,
but across the world. I think the conflict in Europe, the
conflict in the Middle East and the superpower tensions are definitely
leading to clients being concerned. That concern is leading clients to look
for the safest and strongest financial centers, but also the safest and
strongest financial institutions. Yeah.
And we're you know, we're only in June and we're not this this year if
elections isn't over. I mean, yeah, yeah.
Elections play a huge part as well. We already see how it's shaping markets,
especially with Modi's election. You know, exit polls missing the mark
and then he lost the majority. It's triggering a slump in markets and
then Mexico as well, with the landslide victory of the ruling party raising
concerns of increased state control. And then you have all these conflicts
everywhere, it seems, the Gaza conflict and then Ukraine and potential tension
in South China Sea where much of the Wall Street passes through.
So all these are potential disruptions to supply chains.
So you're talking about maybe potentially two different trade wars
that are going on right now. If it's higher manufacturing, Certainly
we talk about that a lot. Even in the low tech exports, you're
starting to see that. What are we seeing there?
Yeah, I think that's something important to point out.
It feels like something quietly brewing because there's been a lot of focus
right now on all these tariffs on the new growth drivers, your EVs, your solar
cells, your batteries. But China has been also ramping up a
lot, a huge surplus, near record surplus on all manufacturing goods.
And I'm talking about the traditional industries like your steel, your animal
feed. There's also their exports of soybean
had hit nearly five times of last year in the first four months of this year.
And China traditionally is an exporter of is an importer of soybeans.
So that's really speaking to how all these goods are.
You know, it's very hard to get them consumed in China because of the weak
economy and a prolonged poverty crisis. And this combination of soaring exports
and cheaper prices is a very dangerous combination because it could trigger
reactions not just from the US and EU, but also the emerging markets.
We already see Latin American countries slapping increasing tariffs on Chinese
steel. Countries like Thailand, Saudi Arabia
are considering to take similar steps South Korea, India.
They also put tariffs on Chinese manufactured goods.
So this is something to look out for as well.
A potential trade war on both fronts as low tech exports pick up as well.
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