Do Geopolitical Risks Matter?

While geopolitical risk is at the forefront of all media, investors need to remember that their focus should remain on the long-term fundamentals of the companies they invest in as well as the valuations of the securities they hold. Geopolitical risks seldom have a lasting impact on asset prices.

This was seen during the COVID-19 pandemic of 2020, the start of the war in Ukraine in 2022, the October 7, 2023 attacks on Israel, and with the announcement of the new U.S. trade tariffs in April 2025. All of these events followed the same pattern. Investor confidence dropped, stock prices corrected, economists and analysts lowered their economic growth and corporate profit expectations. Analysts discussed the implications of the "new paradigm" the world had entered.

Yet, in every single case, financial markets recovered their losses in a matter of weeks. Investors who panicked and sold risky assets ended up regretting their decision. We believe this time will be no different and that soon the situation in Iran will no longer be the main concern for financial markets.

By now, investors have also gained a better understanding of Donald Trump. They know that he can make outrageous comments in order to force the other side to come up with a better proposal. The comments he made on the United States ending the war and letting other countries deal with the Strait of Hormuz fit this pattern. Investors also know that Trump has a short attention span and that he is more attached to the "optics" of deals than their actual substance. In 2025, investors who ignored the noise from Trump's declarations performed better than those who made decisions based on his latest statements. We expect this to be the same in 2026.

We remain positive on equity markets and recommend buying the current correction in financial markets.