Diplomatic efforts have intensified to stop the fighting between both Russia and Ukraine as well as Israel and Hamas. But a durable resolution to both conflicts will not be easy to achieve. The public disagreement in the White House between President Trump and his Ukrainian counterpart underlined the challenges.
Meanwhile, the prime geopolitical concern for many investors is the risk of a trade war between the US and its main partners. Against this backdrop, we favor strategies to improve portfolio resilience while participating in potential market gains.
• The Trump administration has held talks aimed at ending to the war between Russia and Ukraine. This week, top US officials are scheduled to talk to their Ukrainian counterparts in Saudi Arabia.
• Optimism that hostilities could cease has already started to impact markets, boosting the euro and regional equities, while putting downward pressure on oil prices.
• The initial first phase of the ceasefire between Hamas and Israel ran out over the weekend; it is unclear whether the ceasefire can persist and the second stage be
• Talks between President Trump and Ukrainian leader Volodymyr Zelenskyy were cut short on 28 February after a public disagreement between the two in the White House.
• Germany's likely new chancellor, Friedrich Merz, has said that the US government is “largely indifferent to the fate of Europe.”
• Trade tensions have remained high. President Trump has warned there could be a “period of transition” as US tariffs move higher, refusing to rule out either a recession or higher US inflation.
• A well-diversified portfolio can potentially reduce swings in wealth.
• In equities, capital preservation strategies can help manage downside risks.
• We also continue to see gold as an effective hedge against geopolitical and inflation risks.
The Trump administration believes Ukraine is “ready to move” forward with talks regarding a ceasefire, according to a senior US state department official cited by the BBC. The US Secretary of State Marco Rubio and National Security Adviser Mike Waltz will arrive in Saudi Arabia this week for talks with Ukrainian negotiators, the BBC said.
Geopolitical uncertainty remains elevated as the Trump administration continues to unveil its policies. But investors should favor strategies to cope with volatility rather than retreat from risk assets.
• The effects of international conflicts on markets typically fade fast. Since the attack on Pearl Harbor in 1941, the S&P 500 has been higher two-thirds of the time 12 months after the start of a crisis. Half the time, markets have only taken a month to recover, according to our analysis.
• Diversification has been shown to help reduce portfolio volatility, ensure investors tap more sources of return, and help investors avoid behavioral bias amid uncertainty.
• Hedge funds have historically exhibited an ability to capture tactical dislocations across sectors and asset classes to generate alpha, while still adhering to strict risk limits.
We believe exiting markets in response to immediate geopolitical uncertainty tends to be counterproductive. Instead, we see ways investors can consider improving the resilience of portfolios, such as proper diversification, including an allocation to hedge funds and exposure to gold.
