Geopolitical Risks Can Shock Portfolios — Active Can Help

Market discourse and investor discussion has heavily focused on AI this year, and for good reason — AI capex has been a huge driver of market and portfolio performance. Tariffs, also, have been a big story, from liberation day to the latest trade conflict with China. Lingering in the background there, however, have been other, notable risks. Geopolitical risks, specifically, may be underrated by investors, inviting a look at possible solutions.

See more: Why Active Investing Can Get More Out of a Fed Rate Cut

Tariffs, of course, count as a geopolitical risk, in this case coming mostly from domestic U.S. sources. The resultant trade conflicts, too, count as geopolitical risks. That said, other issues may be worth mentioning for their potential impacts.

First and foremost, the growing tension between the U.S. and Venezuela deserves mention. Venezuela of course remains a major oil producer, and potential kinetic conflict would have a serious impact on oil prices and energy writ large. 

What’s more, U.S.-Venezuela tensions aren’t the only factor looming over oil prices. The next few days will also see OPEC and its members and allies meet to discuss production targets. A decision there carries ramifications for the broader economy and, in congruence with tensions between a member state and a global superpower, it could loom over investing to close 2025.

Russia and China both also remain potential catalysts for conflict along with the United States. Eastern Europe still has an ongoing, full-blown land war. Tensions between Russia and NATO ride the line between cold and hot war. Chinese military exercises and naval invasion rehearsals suggest a Taiwan conflict is never too far away.

Active investing can help portfolios prepare for such geopolitical risks. Active ETFs can adapt to events while leaning heavily on fundamental research. That fundamental research helps fund find those companies poised to withstand uncertainty. They often demonstrate strong cash flow, for example, helping them prove their durability in uncertainty. For those minding geopolitical risks, especially for foreign equities, active can help.

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