According to a report by Forbes, geopolitical factors and election uncertainty are the biggest concern for sovereign wealth managers. reconnaissance From investment firm Invesco, published Monday. More than 80% of managers said geopolitical tensions are the biggest short-term risk, and fragmentation and protectionism are the biggest long-term risk, according to the firm’s Global Sovereign Asset Management report, which surveyed central banks and sovereign wealth funds that oversee about $22 trillion in assets.
Last year, inflation was a top priority for central bankers and sovereign wealth fund managers, with more than 80% citing rising prices as their biggest short-term concern.
A series of elections this year, including the upcoming US presidential election in November, is fuelling geopolitical uncertainty. “Elections are an unknown for the global economy and could also have an impact on the inflation outlook,” one Western central banker said in an Invesco report.
A more complex geopolitical environment could complicate what has been a generally good year for sovereign investors. More than half of investors beat their 2023 return targets, compared with less than 40% the year before, according to Invesco. Median returns rose to 7.2% last year, compared with a 3.5% decline in 2022.
But there is also opportunity. More than half of Invesco survey respondents believe that diversifying supply chains would help emerging markets. One Asian sovereign wealth fund told Invesco that Latin America “could benefit from ongoing supply chain reconfiguration.”
Sovereign investors are also turning to gold, a traditionally safe asset. More than half of central bankers see gold as more attractive as a “non-political asset,” according to Invesco. Bankers worry that foreign reserves are now weaponized and vulnerable to sanctions and confiscation.
Gold is a “confidence-building asset” and a “hedge against the weaponization of currencies,” one Asian central bank governor told Invesco.
uncertainty about elections
This year’s unexpected election results have already impacted the markets.
Indian stock markets briefly fell when Prime Minister Narendra Modi failed to win a parliamentary majority, meaning he will need to work with other parties to secure his pro-business agenda. The Nifty 50 index, which tracks the 50 largest companies listed on the National Stock Exchange of India, He falls 6% when results were announced in early June.
French markets Reverse Retreats After the National Rally, a far-right party, failed to win a legislative majority in the last elections.
Investors are also closely watching the run-up to the US presidential election in November.
President Joe Biden announced Sunday that he will not accept the Democratic presidential nomination and endorsed Vice President Kamala Harris in the race to defeat former President Donald Trump in November.
Analysts Divided About what this new uncertainty means for investors and the “Trump trade,” or an investment strategy that focuses on sectors, companies and countries that stand to benefit from Trump’s economic and foreign policies.
“There was a lot of confidence around a Trump win, and markets are not going to like this new uncertainty,” said Gene Munster, co-founder and managing partner of Deepwater Asset Management. Bloomberg.
gold prices Edged The US dollar rose slightly and fell in early Asian trading, after Biden’s announcement.