Updated December 30, 2024
Jamie Dimon Says Geopolitical Risk Dwarfs All Other Concerns: Why That Also Creates Massive Opportunity
Jamie Dimon Says Geopolitical Risk Dwarfs All Other Concerns: Why That Also Creates Massive Opportunity
Jamie Dimon Says Geopolitical Risk Dwarfs All Other Concerns: Why That Also Creates Massive Opportunity
AJ Giannone, CFA
TheMacroscope
Jamie Dimon Says Geopolitical Risk Dwarfs All Other Concerns: Why That Also Creates Massive Opportunity
There is constant debate about whether US and global economic growth will keep up in this new world of stubborn inflation and political handwringing. Following the COVID-19 pandemic and subsequent GDP boost due to trillions of dollars of stimulus tossed into the system, the back and forth centered on whether a soft landing would ensue or if deeper recession was in the cards.
Those discussions missed the mark. In early 2022 – when Russia invaded Ukraine – the world witnessed the immediate negative impact of geopolitical risks on financial markets. The price of a barrel of oil soared above $120 having traded negative not even two years before. The Volatility Index (VIX) skyrocketed above 30 on a few occasions as bond yields took flight. Inflation was made worse by actions not at home, but abroad by Putin. The S&P 500 fell into a bear market later that year, not bottoming until the following October.
As the hot war progressed, opportunities revealed themselves to patient investors. Equities reached decently attractive valuations and interest rates that ballooned from under 2% to above 5% offered those with an income focus a chance to lock in rates above the future inflation rate. On a more tactical level, getting long the Energy sector or crude oil via an ETF or a futures position early in 2022 would have worked wonders to protect portfolios from both falling stock prices and soaring yields. With fear gripping so many niches of the global market, keeping some dry powder in cash turned out to be a sage move too, despite high and rising inflation at the time.
At a recent economic conference at Georgetown University, Jamie Dimon, CEO of JPMorgan Chase, described geopolitics as dwarfing all other macro risks today. The war in Ukraine, tensions between Israel and Iran, and rising angst between the US and China all contribute to elevated risks on the world stage. The issue is more serious than at any other time since 1945, per Dimon. Iran, North Korea, and Russia are like the modern evil empire, working each day against America’s enduring strength and prosperity.
While it’s true that there’s almost always a war about to break out and uncertainty regarding what the near future will look like in say, the Middle East, today’s challenges are as serious as they have been in decades. We see that reality seeping into financial markets, and when that happens, investors must take note and weigh risks and opportunities within their portfolios.
How Great Change Brings Great Opportunities
When Jamie Dimon speaks, markets listen. “America’s banker” is notorious for his subdued opinions on the macro picture, but his comments at Georgetown in 2024 struck a chord with our team. While his depiction of the current geopolitical situation was sobering, it made us realize that with great change come long-term investment opportunities – the takeaway shouldn’t be “sell it all and hide in cash.”
Quite the opposite. When bouts of fear rattle markets, the wise investor doesn’t panic, but is already prepared to deploy cash into assets, securities, and strategies that are favorable from a long-term risk/reward perspective. Going overweight oil and gas stocks in early 2022 would have been an example of a lucrative tactical play just as buying stocks and bonds later that year when sentiment was the worst would have been a long-term win.
Other Macro Considerations: Monetary Policy During Turbulent Geopolitical Eras
Rising conflict across the globe affects how the Federal Reserve and other central banks execute monetary policy. The Russia-Ukraine war contributed to what would become a four-decade high in US inflation. Not since the days of Paul Volcker at the helm of the Fed and President Reagan taking charge after the tumult of the 1970s has there been such an uphill climb to get the US economy on the right footing.
Indeed, today’s situation bears striking similarities to the early 1980s. High inflation, stagnant growth, and despondency at dinner tables across the nation may not have been the ideal setup for a long-term investment opportunity back then. Moreover, coming into Reagan’s first term, there was a sense that the US had lost a step to Japan and other emerging world economic powerhouses. But amid the geopolitical uncertainty of that time lay the groundwork for one of the most epic bull markets in history.
Reagan inherited a mess from President Carter, and it took until the summer of 1982 – 19 months into the Gipper’s first term – for US stocks to bottom. The five-year return from there was something to behold. The S&P 500 soared from 102 in August of 1982 to 338 by August of 1987. Including dividends, the compounded annual return was just shy of 30%. That’s a better score than even the best 5-year run during the 1990s dot-com boom or from the lows in 2009 to today’s record S&P 500 level.
S&P 500’s Big Bull Market in the Early-Mid 1980s
Source: Stockcharts.com
S&P 500 Total Return Index Rolling 5-Year Performance: A Peak in 1987
Source: Portfolio Visualizer
Needless to say, taking an opportunistic approach to investing during that period of geopolitical unease was lucrative. Sure, Black Monday occurred just a few months after that intense bull market, but stocks recovered quickly, and the S&P 500 even finished 1987 with a gain.
Parallels to the 2020s and Trump 2.0: Tariffs & Macro Volatility
Just as Volcker and Reagan faced challenges and even sharp criticism in the early 1980s, Fed Chair Powell and President Trump encounter issues today given how reckless monetary and fiscal policies have been in the last handful of years. What’s more, incompetence on the global stage has weakened America’s relationship with both our allies and our ability to control the evildoers of today.
Powell, of course, had a major hand in crafting the inflation mess of the early 2020s that lingers through today, but his predecessors also enacted monetary policies that led to manufacturing production being diverted to overseas countries. President Trump’s tariffs are met with vitriol from the left and scare tactics on the American people, suggesting that major inflation and economic hardship will result from, say, a 60% import tax on Chinese goods. But we saw from Trump’s first term that the inflation impact of tariffs is actually modest and a one-time event – even if they are imposed. The Art of the Deal suggests that high tariffs may just be a launching pad for America First policies to be agreed upon between nations.
Ultimately, Trump seeks to bring production back to the US. Globalization’s perils have been seen and felt in many parts of our country, and a strong domestic manufacturing sector keeps the US safe and strong. It’s not merely about bringing jobs back home, but also about fostering an innovative workforce. It’s encouraging to see people like Elon Musk devote efforts to inspiring Americans – his innovation is an example of how the US can be the dominant player in geopolitics.
Why Geopolitical Risk Creates Opportunity
As famed investor Ray Dalio put it in Principles for Dealing with the Changing World Order, “The degree of inventiveness and innovation in a society is the main driver of its productivity. An innovative and commercial spirit is the lifeblood of a thriving economy. Without innovation, productivity growth would grind to a halt. Innovations that allow a country’s workers to produce more relative to the rest of the world feed into their cost competitiveness, making them more attractive places to do business.”
Trump’s tariffs, which began in his first term, and were largely continued by the Biden administration, come alongside a global “reshoring” theme. Putin’s war also catalyzed the need, particularly in Europe, to reduce dependency on foreign adversaries for energy production. These reshoring trends offer opportunities for investors. The Industrials and Materials sectors feature low-priced growth ideas, and even the Energy space features firms that stand to benefit from American First policies.
Will there be volatility on the road back to a manufacturing renaissance? Absolutely. Can the US lead once again in areas away from technology? We sure can. In fact, prosperity and innovation almost always stem from a crisis.
Take the oil price run-up of the mid-2000s. A barrel of WTI went from under $20 in late 2001 to $147 by July 2008. Capital-intensive companies and American commuters were crimped by higher oil and gas prices. Energy companies were incentivized to not only drill for more oil, but also develop efficient tech-driven exploration and production methods. Today, the US is the world leader in LNG production, and we are more energy-independent than ever.
WTI Crude Oil: $17 to $147 From 2001 to 2008
Source: Stockcharts.com
It goes to show that while geopolitical risk is often framed as a negative, it often creates an opening for innovation, new market leadership, and investment opportunities. Today’s tumult is the right environment for new booms, and you should be ready to pounce.
Building a Global Macro Portfolio: Lessons for Investors
There are a lot of moving pieces as the 2020s press on. Amid many seismic shifts ongoing, investors must have a strategy that sets up for success. Allio believes that a global macro portfolio is the best approach. An allocation that leverages economic, political, and technical market trends can focus on emerging risks and high-reward opportunities. Here are some of the core tenets:
Diversification: While the US has the natural protection of oceans to our east and west, it’s possible that new growth areas may sprout in certain geographies elsewhere. Emerging markets should be on your radar given current valuations along with prime corners of the globe that may be looked to as “friendshoring” appetite grows.
Flexibility: We’ve seen how geopolitics can shift on a dime while conditions in some countries change after a snap election. Capitalizing on such changes requires you to be nimble and open to new trends. Allio’s Macro Dashboard makes tracking these events simple by distilling economic data into actionable insights, helping you adjust your strategy with confidence.
Thematic Exposure: Allio’s global macro portfolios home in on certain themes. America’s manufacturing comeback, de-dollarization, and even your own values-based style are lynchpins to our dynamic macro portfolio solutions. For those less sure about building a portfolio themselves, Allio offers Managed Portfolios designed by experts who monitor and adjust for changing conditions—helping clients stay ahead of the curve.
Portfolio Hedging: There are times when playing defense is the most important strategy. Having a cash position, exposure to gold and crypto, or simply avoiding certain slices of the market at times are prudent to limit drawdowns.
The Bottom Line
Jamie Dimon's warning about geopolitical risk is not a call for retreat, but a reminder to always be vigilant as an investor. Tensions on the world stage usually spark volatility, then opportunity for global macro investors. Just as uncertainty was elevated in the early 1980s in advance of the greatest investment period of recent generations, today’s challenges may result in an innovation rebirth for those prepared.
Being dynamic with your long-term investment strategy is key. Allio’s global macro portfolios are designed to keep you in control in this ever-changing world. By identifying trends in economics, policy, and innovation, you too can stay ahead of the curve.
Jamie Dimon Says Geopolitical Risk Dwarfs All Other Concerns: Why That Also Creates Massive Opportunity
There is constant debate about whether US and global economic growth will keep up in this new world of stubborn inflation and political handwringing. Following the COVID-19 pandemic and subsequent GDP boost due to trillions of dollars of stimulus tossed into the system, the back and forth centered on whether a soft landing would ensue or if deeper recession was in the cards.
Those discussions missed the mark. In early 2022 – when Russia invaded Ukraine – the world witnessed the immediate negative impact of geopolitical risks on financial markets. The price of a barrel of oil soared above $120 having traded negative not even two years before. The Volatility Index (VIX) skyrocketed above 30 on a few occasions as bond yields took flight. Inflation was made worse by actions not at home, but abroad by Putin. The S&P 500 fell into a bear market later that year, not bottoming until the following October.
As the hot war progressed, opportunities revealed themselves to patient investors. Equities reached decently attractive valuations and interest rates that ballooned from under 2% to above 5% offered those with an income focus a chance to lock in rates above the future inflation rate. On a more tactical level, getting long the Energy sector or crude oil via an ETF or a futures position early in 2022 would have worked wonders to protect portfolios from both falling stock prices and soaring yields. With fear gripping so many niches of the global market, keeping some dry powder in cash turned out to be a sage move too, despite high and rising inflation at the time.
At a recent economic conference at Georgetown University, Jamie Dimon, CEO of JPMorgan Chase, described geopolitics as dwarfing all other macro risks today. The war in Ukraine, tensions between Israel and Iran, and rising angst between the US and China all contribute to elevated risks on the world stage. The issue is more serious than at any other time since 1945, per Dimon. Iran, North Korea, and Russia are like the modern evil empire, working each day against America’s enduring strength and prosperity.
While it’s true that there’s almost always a war about to break out and uncertainty regarding what the near future will look like in say, the Middle East, today’s challenges are as serious as they have been in decades. We see that reality seeping into financial markets, and when that happens, investors must take note and weigh risks and opportunities within their portfolios.
How Great Change Brings Great Opportunities
When Jamie Dimon speaks, markets listen. “America’s banker” is notorious for his subdued opinions on the macro picture, but his comments at Georgetown in 2024 struck a chord with our team. While his depiction of the current geopolitical situation was sobering, it made us realize that with great change come long-term investment opportunities – the takeaway shouldn’t be “sell it all and hide in cash.”
Quite the opposite. When bouts of fear rattle markets, the wise investor doesn’t panic, but is already prepared to deploy cash into assets, securities, and strategies that are favorable from a long-term risk/reward perspective. Going overweight oil and gas stocks in early 2022 would have been an example of a lucrative tactical play just as buying stocks and bonds later that year when sentiment was the worst would have been a long-term win.
Other Macro Considerations: Monetary Policy During Turbulent Geopolitical Eras
Rising conflict across the globe affects how the Federal Reserve and other central banks execute monetary policy. The Russia-Ukraine war contributed to what would become a four-decade high in US inflation. Not since the days of Paul Volcker at the helm of the Fed and President Reagan taking charge after the tumult of the 1970s has there been such an uphill climb to get the US economy on the right footing.
Indeed, today’s situation bears striking similarities to the early 1980s. High inflation, stagnant growth, and despondency at dinner tables across the nation may not have been the ideal setup for a long-term investment opportunity back then. Moreover, coming into Reagan’s first term, there was a sense that the US had lost a step to Japan and other emerging world economic powerhouses. But amid the geopolitical uncertainty of that time lay the groundwork for one of the most epic bull markets in history.
Reagan inherited a mess from President Carter, and it took until the summer of 1982 – 19 months into the Gipper’s first term – for US stocks to bottom. The five-year return from there was something to behold. The S&P 500 soared from 102 in August of 1982 to 338 by August of 1987. Including dividends, the compounded annual return was just shy of 30%. That’s a better score than even the best 5-year run during the 1990s dot-com boom or from the lows in 2009 to today’s record S&P 500 level.
S&P 500’s Big Bull Market in the Early-Mid 1980s
Source: Stockcharts.com
S&P 500 Total Return Index Rolling 5-Year Performance: A Peak in 1987
Source: Portfolio Visualizer
Needless to say, taking an opportunistic approach to investing during that period of geopolitical unease was lucrative. Sure, Black Monday occurred just a few months after that intense bull market, but stocks recovered quickly, and the S&P 500 even finished 1987 with a gain.
Parallels to the 2020s and Trump 2.0: Tariffs & Macro Volatility
Just as Volcker and Reagan faced challenges and even sharp criticism in the early 1980s, Fed Chair Powell and President Trump encounter issues today given how reckless monetary and fiscal policies have been in the last handful of years. What’s more, incompetence on the global stage has weakened America’s relationship with both our allies and our ability to control the evildoers of today.
Powell, of course, had a major hand in crafting the inflation mess of the early 2020s that lingers through today, but his predecessors also enacted monetary policies that led to manufacturing production being diverted to overseas countries. President Trump’s tariffs are met with vitriol from the left and scare tactics on the American people, suggesting that major inflation and economic hardship will result from, say, a 60% import tax on Chinese goods. But we saw from Trump’s first term that the inflation impact of tariffs is actually modest and a one-time event – even if they are imposed. The Art of the Deal suggests that high tariffs may just be a launching pad for America First policies to be agreed upon between nations.
Ultimately, Trump seeks to bring production back to the US. Globalization’s perils have been seen and felt in many parts of our country, and a strong domestic manufacturing sector keeps the US safe and strong. It’s not merely about bringing jobs back home, but also about fostering an innovative workforce. It’s encouraging to see people like Elon Musk devote efforts to inspiring Americans – his innovation is an example of how the US can be the dominant player in geopolitics.
Why Geopolitical Risk Creates Opportunity
As famed investor Ray Dalio put it in Principles for Dealing with the Changing World Order, “The degree of inventiveness and innovation in a society is the main driver of its productivity. An innovative and commercial spirit is the lifeblood of a thriving economy. Without innovation, productivity growth would grind to a halt. Innovations that allow a country’s workers to produce more relative to the rest of the world feed into their cost competitiveness, making them more attractive places to do business.”
Trump’s tariffs, which began in his first term, and were largely continued by the Biden administration, come alongside a global “reshoring” theme. Putin’s war also catalyzed the need, particularly in Europe, to reduce dependency on foreign adversaries for energy production. These reshoring trends offer opportunities for investors. The Industrials and Materials sectors feature low-priced growth ideas, and even the Energy space features firms that stand to benefit from American First policies.
Will there be volatility on the road back to a manufacturing renaissance? Absolutely. Can the US lead once again in areas away from technology? We sure can. In fact, prosperity and innovation almost always stem from a crisis.
Take the oil price run-up of the mid-2000s. A barrel of WTI went from under $20 in late 2001 to $147 by July 2008. Capital-intensive companies and American commuters were crimped by higher oil and gas prices. Energy companies were incentivized to not only drill for more oil, but also develop efficient tech-driven exploration and production methods. Today, the US is the world leader in LNG production, and we are more energy-independent than ever.
WTI Crude Oil: $17 to $147 From 2001 to 2008
Source: Stockcharts.com
It goes to show that while geopolitical risk is often framed as a negative, it often creates an opening for innovation, new market leadership, and investment opportunities. Today’s tumult is the right environment for new booms, and you should be ready to pounce.
Building a Global Macro Portfolio: Lessons for Investors
There are a lot of moving pieces as the 2020s press on. Amid many seismic shifts ongoing, investors must have a strategy that sets up for success. Allio believes that a global macro portfolio is the best approach. An allocation that leverages economic, political, and technical market trends can focus on emerging risks and high-reward opportunities. Here are some of the core tenets:
Diversification: While the US has the natural protection of oceans to our east and west, it’s possible that new growth areas may sprout in certain geographies elsewhere. Emerging markets should be on your radar given current valuations along with prime corners of the globe that may be looked to as “friendshoring” appetite grows.
Flexibility: We’ve seen how geopolitics can shift on a dime while conditions in some countries change after a snap election. Capitalizing on such changes requires you to be nimble and open to new trends. Allio’s Macro Dashboard makes tracking these events simple by distilling economic data into actionable insights, helping you adjust your strategy with confidence.
Thematic Exposure: Allio’s global macro portfolios home in on certain themes. America’s manufacturing comeback, de-dollarization, and even your own values-based style are lynchpins to our dynamic macro portfolio solutions. For those less sure about building a portfolio themselves, Allio offers Managed Portfolios designed by experts who monitor and adjust for changing conditions—helping clients stay ahead of the curve.
Portfolio Hedging: There are times when playing defense is the most important strategy. Having a cash position, exposure to gold and crypto, or simply avoiding certain slices of the market at times are prudent to limit drawdowns.
The Bottom Line
Jamie Dimon's warning about geopolitical risk is not a call for retreat, but a reminder to always be vigilant as an investor. Tensions on the world stage usually spark volatility, then opportunity for global macro investors. Just as uncertainty was elevated in the early 1980s in advance of the greatest investment period of recent generations, today’s challenges may result in an innovation rebirth for those prepared.
Being dynamic with your long-term investment strategy is key. Allio’s global macro portfolios are designed to keep you in control in this ever-changing world. By identifying trends in economics, policy, and innovation, you too can stay ahead of the curve.
Jamie Dimon Says Geopolitical Risk Dwarfs All Other Concerns: Why That Also Creates Massive Opportunity
There is constant debate about whether US and global economic growth will keep up in this new world of stubborn inflation and political handwringing. Following the COVID-19 pandemic and subsequent GDP boost due to trillions of dollars of stimulus tossed into the system, the back and forth centered on whether a soft landing would ensue or if deeper recession was in the cards.
Those discussions missed the mark. In early 2022 – when Russia invaded Ukraine – the world witnessed the immediate negative impact of geopolitical risks on financial markets. The price of a barrel of oil soared above $120 having traded negative not even two years before. The Volatility Index (VIX) skyrocketed above 30 on a few occasions as bond yields took flight. Inflation was made worse by actions not at home, but abroad by Putin. The S&P 500 fell into a bear market later that year, not bottoming until the following October.
As the hot war progressed, opportunities revealed themselves to patient investors. Equities reached decently attractive valuations and interest rates that ballooned from under 2% to above 5% offered those with an income focus a chance to lock in rates above the future inflation rate. On a more tactical level, getting long the Energy sector or crude oil via an ETF or a futures position early in 2022 would have worked wonders to protect portfolios from both falling stock prices and soaring yields. With fear gripping so many niches of the global market, keeping some dry powder in cash turned out to be a sage move too, despite high and rising inflation at the time.
At a recent economic conference at Georgetown University, Jamie Dimon, CEO of JPMorgan Chase, described geopolitics as dwarfing all other macro risks today. The war in Ukraine, tensions between Israel and Iran, and rising angst between the US and China all contribute to elevated risks on the world stage. The issue is more serious than at any other time since 1945, per Dimon. Iran, North Korea, and Russia are like the modern evil empire, working each day against America’s enduring strength and prosperity.
While it’s true that there’s almost always a war about to break out and uncertainty regarding what the near future will look like in say, the Middle East, today’s challenges are as serious as they have been in decades. We see that reality seeping into financial markets, and when that happens, investors must take note and weigh risks and opportunities within their portfolios.
How Great Change Brings Great Opportunities
When Jamie Dimon speaks, markets listen. “America’s banker” is notorious for his subdued opinions on the macro picture, but his comments at Georgetown in 2024 struck a chord with our team. While his depiction of the current geopolitical situation was sobering, it made us realize that with great change come long-term investment opportunities – the takeaway shouldn’t be “sell it all and hide in cash.”
Quite the opposite. When bouts of fear rattle markets, the wise investor doesn’t panic, but is already prepared to deploy cash into assets, securities, and strategies that are favorable from a long-term risk/reward perspective. Going overweight oil and gas stocks in early 2022 would have been an example of a lucrative tactical play just as buying stocks and bonds later that year when sentiment was the worst would have been a long-term win.
Other Macro Considerations: Monetary Policy During Turbulent Geopolitical Eras
Rising conflict across the globe affects how the Federal Reserve and other central banks execute monetary policy. The Russia-Ukraine war contributed to what would become a four-decade high in US inflation. Not since the days of Paul Volcker at the helm of the Fed and President Reagan taking charge after the tumult of the 1970s has there been such an uphill climb to get the US economy on the right footing.
Indeed, today’s situation bears striking similarities to the early 1980s. High inflation, stagnant growth, and despondency at dinner tables across the nation may not have been the ideal setup for a long-term investment opportunity back then. Moreover, coming into Reagan’s first term, there was a sense that the US had lost a step to Japan and other emerging world economic powerhouses. But amid the geopolitical uncertainty of that time lay the groundwork for one of the most epic bull markets in history.
Reagan inherited a mess from President Carter, and it took until the summer of 1982 – 19 months into the Gipper’s first term – for US stocks to bottom. The five-year return from there was something to behold. The S&P 500 soared from 102 in August of 1982 to 338 by August of 1987. Including dividends, the compounded annual return was just shy of 30%. That’s a better score than even the best 5-year run during the 1990s dot-com boom or from the lows in 2009 to today’s record S&P 500 level.
S&P 500’s Big Bull Market in the Early-Mid 1980s
Source: Stockcharts.com
S&P 500 Total Return Index Rolling 5-Year Performance: A Peak in 1987
Source: Portfolio Visualizer
Needless to say, taking an opportunistic approach to investing during that period of geopolitical unease was lucrative. Sure, Black Monday occurred just a few months after that intense bull market, but stocks recovered quickly, and the S&P 500 even finished 1987 with a gain.
Parallels to the 2020s and Trump 2.0: Tariffs & Macro Volatility
Just as Volcker and Reagan faced challenges and even sharp criticism in the early 1980s, Fed Chair Powell and President Trump encounter issues today given how reckless monetary and fiscal policies have been in the last handful of years. What’s more, incompetence on the global stage has weakened America’s relationship with both our allies and our ability to control the evildoers of today.
Powell, of course, had a major hand in crafting the inflation mess of the early 2020s that lingers through today, but his predecessors also enacted monetary policies that led to manufacturing production being diverted to overseas countries. President Trump’s tariffs are met with vitriol from the left and scare tactics on the American people, suggesting that major inflation and economic hardship will result from, say, a 60% import tax on Chinese goods. But we saw from Trump’s first term that the inflation impact of tariffs is actually modest and a one-time event – even if they are imposed. The Art of the Deal suggests that high tariffs may just be a launching pad for America First policies to be agreed upon between nations.
Ultimately, Trump seeks to bring production back to the US. Globalization’s perils have been seen and felt in many parts of our country, and a strong domestic manufacturing sector keeps the US safe and strong. It’s not merely about bringing jobs back home, but also about fostering an innovative workforce. It’s encouraging to see people like Elon Musk devote efforts to inspiring Americans – his innovation is an example of how the US can be the dominant player in geopolitics.
Why Geopolitical Risk Creates Opportunity
As famed investor Ray Dalio put it in Principles for Dealing with the Changing World Order, “The degree of inventiveness and innovation in a society is the main driver of its productivity. An innovative and commercial spirit is the lifeblood of a thriving economy. Without innovation, productivity growth would grind to a halt. Innovations that allow a country’s workers to produce more relative to the rest of the world feed into their cost competitiveness, making them more attractive places to do business.”
Trump’s tariffs, which began in his first term, and were largely continued by the Biden administration, come alongside a global “reshoring” theme. Putin’s war also catalyzed the need, particularly in Europe, to reduce dependency on foreign adversaries for energy production. These reshoring trends offer opportunities for investors. The Industrials and Materials sectors feature low-priced growth ideas, and even the Energy space features firms that stand to benefit from American First policies.
Will there be volatility on the road back to a manufacturing renaissance? Absolutely. Can the US lead once again in areas away from technology? We sure can. In fact, prosperity and innovation almost always stem from a crisis.
Take the oil price run-up of the mid-2000s. A barrel of WTI went from under $20 in late 2001 to $147 by July 2008. Capital-intensive companies and American commuters were crimped by higher oil and gas prices. Energy companies were incentivized to not only drill for more oil, but also develop efficient tech-driven exploration and production methods. Today, the US is the world leader in LNG production, and we are more energy-independent than ever.
WTI Crude Oil: $17 to $147 From 2001 to 2008
Source: Stockcharts.com
It goes to show that while geopolitical risk is often framed as a negative, it often creates an opening for innovation, new market leadership, and investment opportunities. Today’s tumult is the right environment for new booms, and you should be ready to pounce.
Building a Global Macro Portfolio: Lessons for Investors
There are a lot of moving pieces as the 2020s press on. Amid many seismic shifts ongoing, investors must have a strategy that sets up for success. Allio believes that a global macro portfolio is the best approach. An allocation that leverages economic, political, and technical market trends can focus on emerging risks and high-reward opportunities. Here are some of the core tenets:
Diversification: While the US has the natural protection of oceans to our east and west, it’s possible that new growth areas may sprout in certain geographies elsewhere. Emerging markets should be on your radar given current valuations along with prime corners of the globe that may be looked to as “friendshoring” appetite grows.
Flexibility: We’ve seen how geopolitics can shift on a dime while conditions in some countries change after a snap election. Capitalizing on such changes requires you to be nimble and open to new trends. Allio’s Macro Dashboard makes tracking these events simple by distilling economic data into actionable insights, helping you adjust your strategy with confidence.
Thematic Exposure: Allio’s global macro portfolios home in on certain themes. America’s manufacturing comeback, de-dollarization, and even your own values-based style are lynchpins to our dynamic macro portfolio solutions. For those less sure about building a portfolio themselves, Allio offers Managed Portfolios designed by experts who monitor and adjust for changing conditions—helping clients stay ahead of the curve.
Portfolio Hedging: There are times when playing defense is the most important strategy. Having a cash position, exposure to gold and crypto, or simply avoiding certain slices of the market at times are prudent to limit drawdowns.
The Bottom Line
Jamie Dimon's warning about geopolitical risk is not a call for retreat, but a reminder to always be vigilant as an investor. Tensions on the world stage usually spark volatility, then opportunity for global macro investors. Just as uncertainty was elevated in the early 1980s in advance of the greatest investment period of recent generations, today’s challenges may result in an innovation rebirth for those prepared.
Being dynamic with your long-term investment strategy is key. Allio’s global macro portfolios are designed to keep you in control in this ever-changing world. By identifying trends in economics, policy, and innovation, you too can stay ahead of the curve.
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Disclosures
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, Allio Capital does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.
Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Performance could be volatile; an investment in a fund or an account may lose money.
There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
Disclosures
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, Allio Capital does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.
Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Performance could be volatile; an investment in a fund or an account may lose money.
There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
Disclosures
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes. This material should not be considered an offer or recommendation to buy or sell a security. While information and sources are believed to be accurate, Allio Capital does not guarantee the accuracy or completeness of any information or source provided herein and is under no obligation to update this information.
Past performance is not a guarantee or a reliable indicator of future results. All investments contain risk and may lose value. Performance could be volatile; an investment in a fund or an account may lose money.
There is no guarantee that these investment strategies will work under all market conditions or are appropriate for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market.
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The information furnished on this website is for informational purposes only. The information does not and should not be considered to constitute an offer to buy or sell securities, tax, legal, financial, investment, or other advice The investments and services offered by us may not be suitable for all investors. If you have any doubts as to the merits of an investment, you should seek advice from an independent financial advisor.
What We Do
What We Say
Who We Are
The information furnished on this website is for informational purposes only. The information does not and should not be considered to constitute an offer to buy or sell securities, tax, legal, financial, investment, or other advice. The investments and services offered by us may not be suitable for all investors. If you have any doubts as to the merits of an investment, you should seek advice from an independent financial advisor.
What We Do
What We Say
Who We Are
The information furnished on this website is for informational purposes only. The information does not and should not be considered to constitute an offer to buy or
sell securities, tax, legal, financial, investment, or other advice The investments and services offered by us may not be suitable for all investors. If you have any doubts
as to the merits of an investment, you should seek advice from an independent financial advisor.