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What is Geopolitical Risk and Should Investors Worry? – Part 1

Geopolitical risk has come to mean many different things to different people. But generally, it means political events or events related to regional geography that have the ability to impact global financial markets in substantial ways or sometimes on a daily basis. So, we’re talking about big political risks like Brexit, political conflict in the Mideast that could move oil prices, and sometimes we’re talking about something like a federal election in Canada or the U.S. Frances Donald, a senior economist with Manulife Asset Management, says geopolitical risk is something that figures very largely with financial professionals.

Frances Donald: I’m very surprised as an economist how much time I have to spend dedicated to geopolitical risk and so do most of the financial professionals I work with on a day-to-day basis and that’s particularly true post-2008. In the post-recession world we’ve seen geopolitical risk become a major mover of markets on a daily basis, a weekly basis, and sometimes over a much longer term. What’s key when you’re looking at political risk from a financial professional perspective is to get a sense of where those risks lie in the future, to not get blindsided by them.

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