I wrote previously about how geopolitical developments can affect market prices, but the question remains—for how long?

Those of you who follow my commentary know that I often speak of fundamental value as the “tide” that inexorably pulls prices toward it over longer-term time horizons, and “waves” as shorter-term developments that affect market and currency prices.

In our post-Cold War world, geopolitical developments have become more relevant to investing and more frequent in their occurrence. In the past few years, we have seen political uncertainty in the eurozone, increasing Russian aggressions, and tensions in the Middle East. Last year we saw the United Kingdom vote to exit the European Union and a populist outsider win the U.S. presidential election.

In light of these events, one might logically ask if it’s wise to be a short-term investor and maintain a conservative stance while waiting for these geopolitical developments to play out. Or, does an investor who takes that approach risk waiting forever, since such developments are likely to continue?

When I entered the multi-asset management business in 1990, I believed it was both necessary and sufficient to create superior performance through fundamental valuation. You could sharpen your pencil sharper than the next guy, whether you were looking at individual equity sectors or entire equity markets. So, I would have argued then, conducting better fundamental analysis would give you a leg up against other investment managers.

Today, I believe that fundamental valuation is necessary, but no longer sufficient. We have to navigate the path that prices take on their way to fundamental value.

That doesn’t mean I believe we should all become short-term investors. I simply mean it’s important to try to take advantage of either the short-term panics that are occurring more frequently in the marketplace (if you’re buying), or the short-term periods of euphoria (if you’re selling).

In my opinion, a good short-term approach in the current environment is maintaining a bit more cash than usual, and using that cash to respond to what you perceive as being significant opportunities to buy when prices revert below fundamental values.

And that involves becoming as diversified as possible across asset classes and geographies. It can be difficult because when big events happen, markets all tend to move together. But that’s why we include a healthy dose of currency exposures in our portfolios; it helps us diversify our portfolio and navigate geopolitical developments.

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Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling +1 800 742 7272. Read it carefully before you invest or send money. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2017 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

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Please carefully consider the Funds’ investment objective, risks, charges, and expenses before investing. This and other information is contained in the Funds’ prospectus, which you may obtain by calling +1 800 742 7272. Read it carefully before you invest or send money. Investing includes the risk of loss.

Any statements or opinions expressed are those of the author as of the date of publication, are subject to change without notice as economic and markets conditions dictate, and may not reflect the opinions of other investment teams within William Blair Investment Management, LLC or the Investment Management Division of William Blair & Company, L.L.C.

This content is for informational and educational purposes only and not intended as investment advice or a recommendation to buy or sell any security. Investment advice and recommendations can be provided only after careful consideration of an investor’s objectives, guidelines, and restrictions.

Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Investments are subject to market risk. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

William Blair does not provide legal or tax advice. Please consult your tax and/or legal counsel for specific tax questions and concerns.

Distributed by William Blair & Company, L.L.C., member FINRA/SIPC.

Copyright © 2017 William Blair & Company, L.L.C. "William Blair” is a registered trademark of William Blair & Company, L.L.C. No part of this material may be reproduced in any form, or referred to in any other publication, without express written consent.

Statement of Financial Condition | NMS Rule 605 & 606 | Business Continuity Plan | UK Stewardship Code
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