Should you worry about geopolitical events in investing?

Geopolitical events can send tremors through the share market. Should you worry about things like China and the United States?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors in the share market can be sent into a flurry of worry by geopolitical events. Should you worry about them when it comes to investing?

There is growing concern about what's happening with the two superpowers of the world, China and the US.

Western countries aren't happy with how things are going in Hong Kong with a new security law passed by China. The Chinese don't like that Australia was pushing for an inquiry into the coronavirus. The US election could turn out to be a real mess with how things are going with the ongoing spread of the coronavirus.

Geopolitical events can cause big shudders in the share market. Just look what happened during the trade war. Each tweet from President Trump caused the market to react negatively or positively.

Keep geopolitical events in mind

I do think it's important to be aware of what's going on. Sometimes an event can cause the earnings and valuation of shares to move dramatically higher or lower. Look what happened with Bellamy's. Look how changing oil prices have an obvious huge effect on shares like Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO).

Politics can have a big effect on returns. The decisions about the NBN were decided by politicians and this has had a huge effect on Telstra Corporation Ltd (ASX: TLS).

But don't give it too much weight

We also need to keep in mind that geopolitical events will keep happening. There probably isn't going to be a time when we all agree with what the leaders of Australia, the US, China are all doing. 

Geopolitical events have been happening for many centuries. We should expect that things will keep changing. There wouldn't be any share market volatility if there were no surprises.  

The share market reached an all time high in February 2020 despite all previous (and ongoing) problems. As investors we need to stay optimistic for the long-term or else we'll end up missing out on gains.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A cute young girl with curly hair sips a glass of milk through a straw with a smile on her face.
Broker Notes

Up 37% this year, why Macquarie expects A2 Milk shares to keep outperforming

Macquarie remains bullish on A2 Milk shares heading into 2026. Let’s see why.

Read more »

Woman and man calculating a dividend yield.
Share Market News

Big week for markets: Here's what to watch

Tech earnings, rate speculation, and Aussie inflation data could shake markets this week — but long-term investors should keep their…

Read more »

ASX shares Business man marking buy on board and underlining it
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

dissapointed man at falling share price
Share Fallers

Why Boss Energy, Elsight, Pilbara Minerals, and Whitehaven Coal shares are falling today

These shares are starting the week in the red. But why?

Read more »

An older female ASX investor holds a gangster-style fist pump pose showing off gold rings with dollar signs on them.
Broker Notes

Why Macquarie forecasts Northern Star shares are set to surge 55%

Macquarie believes Northern Star shares are well-placed to rocket higher.

Read more »

A group of people gathered around a laptop computer with various expressions of interest, concern and surprise on their faces. All are wearing glasses.
Share Market News

ASX 200 tech stock near record high, is it still a buy?

This company's soaring share price and rising profits are turning heads.

Read more »

Excited couple celebrating success while looking at smartphone.
Share Gainers

Why Bellevue Gold, Bubs, Clarity Pharmaceuticals, and Regal Partners shares are rising today

These shares are starting the week on a positive note.

Read more »

Two people lazing in deck chairs on a beautiful sandy beach throw their hands up in the air.
Travel Shares

Guess which ASX All Ords travel stock just rocketed 17% on an earnings upgrade

Investors are piling into the ASX All Ords travel stock today. Here's what's happening.

Read more »