Incorporating Geopolitical Analysis into your Investment Process

Speaker: Matt Gertken, Vice President, Geopolitical Strategy, BCA Research Inc.

Moderator: Ananth Narayan, Associate Professor, Finance, S.P. Jain Institute of Management and Research

Written by: Vivek Rathi, CFA

Matt Gertken spoke in details about geopolitical situation globally. He delved in to history, explaining how move to the right in 1990’s created inequality and the resultant backlash in UK & USA. Then, he went to explain the poll arithmetic and how pundits generally get it wrong but the polls aren’t that bad.

He also explained, why politicians react the way they do, as they are driven by constraints and not by preferences.  According to him, a recession makes it significantly challenging for an incumbent president to win back the mandate. In fact, structural reform may lead to set back for ruling dispensation but will be beneficial for the economy in long run.

On the future outlook, the key take away were: Fed is expected to hike interest rates, there will be patches of corrections stock Market, don’t expect trade wars to be resolved any time soon, Oil prices will rise and China may try to stimulate economy without success, developing markets will continue to perform better & due to rising trade dispute, consumer oriented economy like India are expected to outperform. Also, India is slowly de-leveraging which is a positive sign. The cleaning up of banks, formalization of taxation and markets is credit positive for India.

On the US China trade war, though, the recent correction in US markets would have prompted Trump to soften position on trade dispute but the US is more insular economy, thus less depended on trade. In contrast, China is slowly becoming insular but is still vulnerable.

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