ETFChannel.com

What to watch in geopolitics in 2020

Thu, Jan 16, 8:04 AM ET, by , BlackRock

The U.S. killing of a top Iranian military leader and the subsequent retaliation by Iran in recent weeks marked an escalation in U.S.-Iran tensions. This reminds us of still heightened geopolitical risks across many dimensions, even as we see a relatively benign backdrop for risk assets in 2020. The U.S.-China trade conflict - the dominant geopolitical risk in 2019 - has paused, yet we expect enduring strategic rivalry between the two countries, especially in technology. We see U.S. Treasuries as a key source of portfolio ballast against potential risk selloffs.

The market's overall attention to global geopolitical risks sits at elevated levels, as proxied by our BlackRock Geopolitical Risk Indicator (BGRI). See the chart above. Our BGRI measures the attention to top 10 risks in analyst reports, social and financial media, and has risen to high levels in recent years. We had raised the likelihood of growing Gulf tensions late last year, and still see ongoing and heightened tensions despite the avoidance of major confrontation between the U.S. and Iran. The market reaction to date to Gulf tensions has been muted, partly reflecting the decreasing heft of the Middle East in determining global oil prices, with the U.S. now a net oil exporter. Yet a sustained escalation that results in repeated attacks on oil facilities or disruptions to shipping in the Persian Gulf - more materially threatening global growth - would likely change this story.

icon-pointer.svgRead more in our Weekly commentary

We see a relatively benign backdrop for risk assets in 2020, with easier financial conditions supporting a growth uptick. Read details in our 2020 Global Outlook. A key underpinning assumption is that global trade tensions move sideways this year. Recent developments in this area have been positive for markets: U.S.-China trade tensions appear to be going sideways, and the U.S.-Mexico-Canada Agreement on trade looks set to pass the U.S. Congress soon. Yet any broader surge in geopolitical risks in the Middle East or elsewhere could undermine the sentiment in - and the performance of - risk assets. What other geopolitical risks should we look out for in 2020? Below we detail three broad dimensions.

First: We are seeing fragmentation at a global level across a range of dimensions, including ideology, trade and technology. Technology decoupling between the U.S. and China is underway and will force countries and businesses to navigate this evolving landscape. We expect such tensions to persist even after a limited “Phase 1” trade deal that may temporarily defuse U.S.-China trade tensions. Domestically, political polarization is reaching a high point in many countries. The U.S., for example, faces a contentious presidential election with the potential for starkly divergent policy outcomes. We have downgraded U.S. equities to neutral on a tactical basis amid rising election uncertainty. The second is an increase in global protests, partly fueled by rising income and wealth inequality and facilitated by social media. Many governments are ill-equipped to respond. With limited monetary and fiscal maneuvering room, this could lead to further unrest in any downturn.

The third is cybersecurity. Tensions are elevated between the U.S. and many adversaries such as Iran and North Korea, which have the capability to mount attacks on critical infrastructure and institutions. An uptick of “ransomware” attacks against cities and states with relatively poor defenses may be a sign of things to come. Markets look to be complacent about such risks: the attention to cyber attacks has been on a steady decline since late 2017, our BGRI shows. U.S. Treasuries and their inflation-protected peers have done well to cushion portfolios against recent risk selloffs - and we prefer them in both tactical and strategic portfolios. Government bonds in Europe and Japan have diminished ability to serve such as role as their yields near lower bounds.

Read more market insights in our Weekly commentary.

Mike Pyle, CFA, is Global Chief Investment Strategist for BlackRock, leading the Investment Strategy function within the BlackRock Investment Institute. He is a regular contributor to The Blog.

Investing involves risks, including possible loss of principal. This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of January 2020 and may change as subsequent conditions vary. The information and opinions contained in this post are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This post may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this post is at the sole discretion of the reader. Past performance is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index. ©2020 BlackRock, Inc. All rights reserved. BLACKROCK is a registered trademark of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners. BIIM0120U-1051277

How to use iBonds like a pro
Thu, Feb 27, 5:44 PM ET,
by , BlackRock

Where we stand on factors
Wed, Feb 26, 5:14 PM ET,
by , BlackRock

3 reasons to stick with tech stocks
Fri, Feb 21, 8:04 AM ET,
by , BlackRock

Coronavirus testing our global outlook
Thu, Feb 20, 11:04 AM ET,
by , BlackRock

How disruption is changing the growth vs. value debate
Wed, Feb 19, 9:34 AM ET,
by , BlackRock

More articles:  1 2 3 4 5 6 7 next »

  BGRI   BlackRock   China   Gulf   Investment   Iran   This   against   assets   attacks   attention   between   geopolitical   global   have   information   other   risk   risks   such   tensions   that   this   trade   with
10 ETFs With Stocks That Insiders Are Buying
10 ETFs With Most Upside To Analyst Targets
25 Dividend Giants Widely Held By ETFs
25 S.A.F.E. Dividend Stocks Increasing Payments For Decades
Broker Darlings: Top 15 Analyst Picks of the Dow
Top 25 Broker Analyst Picks of the S&P 500
Forgotten S&P 500 Giants: Analysts' Current Least Favorites
25 Top Ranked Socially Responsible Dividend Stocks
10 Oversold ETFs
The Top 10 DividendRank'ed Stocks
Warren Buffett Dividend Stocks
The DividendRank Top 25
The Top 10 DividendRank'ed DJIA Components
The Top 10 DividendRank'ed Dow Transports Components
The Top 10 DividendRank'ed Dow Utilities Components
The Top 10 DividendRank'ed Nasdaq 100 Components
10 Stocks Going Ex-Dividend
10 Oversold Dividend Stocks
10 Stocks Where Yields Got More Juicy
10 Dividend Bargains You Can Buy Cheaper Than Insiders Did
Top Ranked Dividend Stocks With Insider Buying
10 Energy Stocks You Can Buy Cheaper Than Insiders Did
10 Metals Stocks You Can Buy Cheaper Than Insiders Did
10 Oversold Metals Stocks
10 Must-Know High-Yield REITs
10 Top DividendRank'ed Financials
10 Top DividendRank'ed Metals Stocks
10 Oversold Energy Stocks
10 Top DividendRank'ed Energy Stocks
10 Top DividendRank'ed Utility Stocks
10 Stocks Crossing Below Book Value
10 Stocks Crossing Above Their 200 Day Moving Average
10 Stocks Crossing Below Their 200 Day Moving Average
10 ETFs Crossing Above Their 200 DMA
The 10 Biggest ETFs
The 10 Best ETF Performers
Best Vanguard ETFs By TTM Performance
Worst Vanguard ETFs By TTM Performance
Best iShares ETFs By TTM Performance
Worst iShares ETFs By TTM Performance
The 10 Worst ETF Performers
10 ETFs With Notable Inflows
10 ETFs With Notable Outflows
Top 10 Analyst Rated Consumer Stocks
Top 10 Analyst Rated Dividend Stocks
Top 10 Analyst Rated Energy Stocks
Top 10 Analyst Rated Financial Stocks
Top 10 Analyst Rated Healthcare Stocks
Top 10 Analyst Rated REIT Stocks
Top 10 Analyst Rated Technology Stocks
Best Dividend Stocks 2000-2020
Best High Dividend Stocks 2000-2020
Top Dividend Stocks 2010-2020
Best High Yield Stocks 2010-2020
Top Dividend Stocks 2015-2020
Top High Dividend Yield Stocks 2015-2020
The Top 10 DividendRank'ed Canadian Stocks
The DividendRank Canada Top 25
10 Canadian Stocks Going Ex-Dividend
10 Oversold Canadian Stocks
10 Canadian Stocks Where Yields Got More Juicy
10 Must-Know High-Yield Canadian Real Estate Stocks
10 Top DividendRank'ed Canadian Financials
10 Must-Know High-Yield Canadian Energy Stocks
10 Canadian Stocks Crossing Below Book Value
10 Canadian Stocks Crossing Above Their 200 Day Moving Avg
10 Canadian Stocks Crossing Below Their 200 Day Moving Avg
Stock market game

What to watch in geopolitics in 2020 | ETF Channel | www.ETFChannel.com

Copyright © 2010 - 2020, All Rights Reserved Nothing in ETF Channel is intended to be investment advice, nor does it represent the opinion of, counsel from, or recommendations by BNK Invest Inc. or any of its affiliates, subsidiaries or partners. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All viewers agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. By visiting, using or viewing this site, you agree to the following Full Disclaimer & Terms of Use and Privacy Policy. Video widget and ETF videos powered by Market News Video. Quote data delayed at least 20 minutes; data powered by Ticker Technologies, and Mergent. Contact ETF Channel; Meet Our Editorial Staff.