The images flicker across our TVs, laptops or phones every day.
Russia’s war in Ukraine continues. Some Ukrainian civilians flee while others take up arms against the invaders. The United States and other NATO nations contemplate how to help the Ukrainians without escalating the conflict into another world war.
And all the while inflation remains high, supply chains face continued disruption, and exorbitant gas prices frustrate motorists in the U.S. and abroad.
As these significant events unfold, investors are left to bemoan how their careful financial plans can, at any moment, become fodder for global events beyond their control; how a metaphorical, or real, fire ignited in some far off country can burn through a financial portfolio as if it were just so much kindling.
The details change, but the phenomenon is nothing new. Global events – from war to political unrest to natural disasters – can and do have an impact on monetary matters, whether it’s the price of stock, the value of currency, or the ability of markets to trade peacefully and efficiently.
Finding investment bright spots
As just one example, let’s take a quick trip back half a century to 1973, a time when stock prices had been rising and investors were giddy with the seemingly unlimited possibilities for their, as it would turn out, overvalued stocks.
Then this 1970s financial bubble did what bubbles do. It burst, the market crashed and the Dow Jones Industrial Average lost half its value. The ensuing recession was widespread. In the United States, seemingly no company or sector escaped its wrath, and abroad, every industrialized nation was afflicted. This was a global recession, nastier than a domestic one just a few years earlier. Because the recession spilled over borders, that made it harder for nation-states to rein it in using the policy tools at their disposal.
Yet, even in the darkest hours of the recession there were investing bright spots. Oil, in particular, ended up performing especially well because October 1973 brought major disruption to the worldwide petroleum market. In response to political and diplomatic events in the Middle East, the Organization of the Petroleum Exporting Countries (OPEC) instituted an embargo that quadrupled the price of oil virtually overnight and sent shockwaves throughout an already reeling global economy. Most investors suffered, but those who had been in oil profited nicely.
Just as today, investors had to face the fact that they and their investments are in no way shielded from the effects of global events. So, should we watch these and other world events with a sense of impending doom, our investments just so much flotsam on a tumultuous global economic sea?
Hardly. Instead, as global events unfold, good or bad, whether made by humans or by nature, investors must be alert to opportunities – because they will be there, even if they aren’t obvious to the casual observer. But to beat your competitors to the punch, you must be the first to recognize these opportunities, and you can’t do that if your focus is fretting about losses rather than continuing to search for potential gains.
Seizing Opportunities
And it’s not just about having the right information. Today, even casual investors buying or selling a few shares of Tesla with their brokerage accounts have more financial and economic data available than Wall Street professionals had even 20 years ago.
But that abundance of information is both a blessing and a curse: information overload only makes it harder to separate the signal from the noise, so you have to cultivate a sixth sense for slicing through the useless information so you can find what is useful.
Unfortunately, most people move from day to day with their eyes fixed firmly in front of them, missing what is happening at the periphery, which is where the best opportunities lie. You have to attune your vision and change your whole mindset, recognizing when a good thing comes your way while perfecting your analysis of its potential risk and reward.
Which brings us back to today’s global events. No one knows how the Russia-Ukraine situation will evolve, but its sequels will most probably affect the global economy for an extended period of time.
In what ways? I believe that supply chains will be disrupted for longer, and some may be permanently shut off; financial flows will be redirected and become less fluid and more expensive; several commodities, including agricultural ones, will remain more expensive.
All that is reason for concern – but it’s not a reason for us to throw up our hands in frustration and resign ourselves to whatever fate brings our way.
Even though you can’t truly forecast the future, you can prepare, recognize, and seize the opportunities where you find them.
François Sicart is a founding partner of Sicart Associates, LLC, and author of Luck Is Not Enough: The Life And Legacy Of A Successful Wealth Manager. He has 52 years of experience managing individual clients’ accounts and their family affairs. Prior to starting Sicart Associates LLC in 2016, Sicart was the founder and chairman of Tocqueville Management Corporation, the general partner of Tocqueville Asset Management L.P. Prior to founding Tocqueville Asset Management in 1985, Mr. Sicart was associated with Tucker Anthony, a New York investment firm. He received a bachelor’s degree from Lycee Carnot in Paris and attended the Ecole des Haute Etudes Commerciales, where he earned an M.B.A at the leading business school in France.
