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.
