That may seem counterintuitive, but if you delve into history, you will discover that markets have more or less found the normal turmoil of geopolitics to be irrelevant. The reasons for this are varied, but consider these factors:
1) Most geopolitical events don’t affect corporate revenue and earnings. Even trade restrictions tend to cause consumption to shift as opposed to going way (though there are, of course, some exceptions).
2) Despite the big bold headlines, most of these events are relatively small from a global economic perspective. Take the Russian-Ukraine skirmishes. Ukraine’s annual gross domestic product is equal to about two days of U.S. GDP.
3) Markets tend to anticipate large events; by the time news breaks, many key investors have already made adjustments to their holdings. “Buy the rumor, sell the news,” is another way of saying the news is already reflected in stock prices.
Source Bloomberg View
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