Why Do Global Pressures Affect Investment Performance?

Market Confidence & Volatility

Global political events can significantly influence investment performance, as they often impact the economy, financial markets, regulatory environments, and investor sentiment. Understanding why can help you stay grounded during periods of uncertainty.

Uncertainty = Risk

Political events such as wars, elections, trade disputes, or coups—creates uncertainty. Financial markets tend to react negatively to the unknown, often resulting in increased volatility and short-term declines in asset prices.

Example: The 2022 Russian invasion of Ukraine triggered a spike in oil and gas prices, global equity market declines, and a surge in demand for perceived “safe haven” assets like gold and the U.S. dollar.

Trade Policies and Tariffs
Trade tensions between major trading nations can disrupt global supply chains, reduce corporate profits, and increase costs for consumers and businesses.

Example: The U.S.–China trade conflict (2018–2020) led to higher tariffs on billions of dollars in goods, adversely affecting sectors like technology and manufacturing and wider market uncertainty.

Interest Rates & Central Bank Policy
Political agendas and leadership changes can indirectly influence monetary policy decisions. Leadership changes or populist agendas may pressure central banks to adopt certain monetary policies.

Example: A government pushing for lower interest rates to stimulate economic growth may stoke inflation concerns or weaken the national currency, impacting both bond and equity markets.

Regulation and Tax Policy
Shifts in government can lead to new regulations and tax reforms, affecting the profitability and valuation of companies in sectors like energy, healthcare, finance, and technology.

Example: Proposals to raise corporate tax rates or tighten regulations can reduce company earnings forecasts, prompting declines in stock prices within affected sectors.

Currency Fluctuations
Political instability or major policy changes can cause a country’s currency to weaken or strengthen, which impacts both foreign investments and the global earnings of multinational companies.

Example: The Brexit vote in 2016 led to a sharp drop in the British pound, which affected U.K. equities and international investor returns.

Sanctions and International Relations
Sanctions, embargoes, or deteriorating diplomatic ties can isolate economies or restrict access to global capital and trade—often with severe consequences for investors.

Example: Sanctions imposed on Russia in 2022 led to a collapse in foreign investment and restricted access to global financial markets, affecting many industries and international businesses with exposure to the region.

Global events are complex and unpredictable—but they are a normal part of long-term investing. While such developments can cause short-term volatility, history shows that markets tend to recover over time. Reacting emotionally or altering your long-term investment strategy during periods of uncertainty can do more harm than good. We encourage investors to remain calm and avoid reactive decisions. Historically, some of the worst market days have been followed by the best. Making impulsive changes to a long-term investment strategy in response to short-term noise can have lasting negative effects on your portfolio.

We are here to help you stay focused on your goals, provide context around market events, and guide you through both calm and turbulent times. If you have any concerns or would like to discuss your portfolio, please don’t hesitate to reach out.