How to navigate uncertainty and risk in today's global economy

Mohamed Shalaby - | Business

Making the distinction between risk and uncertainty may seem simple, but it's important, according to a recent Saxo Bank study. When sufficient data is available, risks can be defined, but uncertainty is influenced by factors that are not measurable. By their very nature, geopolitical events center on uncertainty and the impossibility of making precise predictions about the future.

The events that followed Russia's invasion of Ukraine, according to Peter Garnry, head of equities strategy at Saxo Bank, hint to the formation of a war economy, particularly in Europe. There's a good chance that this will result in more government expenditure and ongoing inflation. As the geopolitical landscape changes and growing tensions between the US, China, and Europe become more significant, trade policies are also playing a bigger role in creating uncertainty and inflation. China's export-focused policies conflict with US and European national security objectives, with tariffs and industrial policies predicted to become more significant in the future.

Because of its reliance on exports, China's economy is vulnerable to changes in the value of other currencies relative to those of its rivals. In particular, the Japanese yen presents a serious threat, as noted in a report titled "The Double Whammy for the Chinese Yuan: Dollar Strength and Yen Weakness" by Charu Chanana, head of forex strategy at Saxo Bank. Recently, officials from South Korea have underlined the necessity of addressing abrupt, unilateral changes in currency prices, as these could trigger a significant reset in the currency markets.

improving investing portfolios going forward

Asset allocation was relatively simple in the past because of the distinct investing environment brought about by the protracted low bond yield period, the stable geopolitical climate, the favorable demographics, the lack of natural disasters, and the low inflation rates. Investors need to pay closer attention to global factors going forward.

The feasibility of totally investing in stocks and placing bets based solely on past performance may be questioned by some. However, depending on previous tactics that have worked well since the early 1980s now involves a major risk due to the multiple structural changes taking place in our global economy.

According to a research viewed by Al Arabiya English, Garnry recommends that investors include specific elements in their investment portfolios to strengthen their resistance to a variety of events in the age of a war economy and unfavorable demographic trends:

Putting money into important areas

The development of artificial intelligence and semiconductors will be crucial in determining future powers. With Europe's severe military capacity deficit and the requirement for innovative technology to combat drone swarms, the defense industry is also vital. The new operating system for businesses and governments alike is cybersecurity. Furthermore, by permitting decentralized energy distribution and diversifying energy sources—both of which naturally lower risks—the renewable energy industry lowers threats to national security.

sectors of strategic equity

The four most strategically appealing industries for long-term investment are healthcare, technology, banking, and energy, according to Saxo Bank's quarterly projections. These industries have the potential to produce sizable real returns over the next ten years, according to available data.

Gold has demonstrated its effectiveness as a risk diversifier in the past during periods of inflation and conflict, and it has done so once more recently.

Goods and Services
Rapid price increases for fundamental commodities have accompanied every significant inflation wave in recorded history. In the contemporary war economy, investing a portion of one's portfolio in commodities is a wise strategic move that works well as a buffer against changes in inflation. Furthermore, the shift to a green economy is probably going to lead to long-term trends in the pricing of copper and other key commodities.

Inflation-protected short-term bonds
Inflation-protected bonds are becoming a valuable addition to investing plans due to inflation rates surpassing forecasts. The principal values of these bonds are automatically adjusted in accordance with the official consumer price index. Because of their short maturity and comparable behavior to cash, short-term bonds offer portfolio managers flexibility while lowering exposure to the elevated risks associated with inflation.

To effectively navigate through unpredictable times, investors must adapt to this complicated economic landscape and reevaluate old investment tactics.

About Author

Mohamed Shalaby
Mohamed Shalaby
69 Total posts

Read Also

UAE reveals new regulations sparking concerns among cold callers

For Mohammed A, a Sri Lankan expat in Dubai, the prospect of a job wasn't just about employment; it was a chance at redemption.

UAE: Banks introduce discounted financing rates for Golden Visa holders

Banks in the United Arab Emirates are rolling out the red carpet for Golden Residency holders, offering a suite of financial products tailored to meet their unique needs and preferences.

Britain begins circulating banknotes bearing the image of King Charles

Wednesday saw the introduction of King Charles' portrait banknotes into circulation in Britain, almost two years after he succeeded the late Queen Elizabeth II.

New York Stock Exchange says glitch that showed Berkshire Hathaway down has been resolved

A technical issue that forced trading for several large equities to halt and resulted in a 99.97% decline in Berkshire Hathaway's stock price was fixed, the New York Stock Exchange announced on Monday.

Indian stocks decline amid poll expectations

Tuesday saw the biggest sell-off in Indian stocks in four years as the results of the vote counting indicated that the alliance led by Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) may not secure an overwhelming majority, as...

UAE declares significant fuel price decrease for June 2024

Recently, news of lower fuel prices starting in June 2024 from the United Arab Emirates (UAE) grabbed headlines.

Emirates Airlines announces the exclusion of Boeing 777X deliveries

Emirates Airlines, a leading global carrier, continues to navigate the dynamic aviation landscape with strategic decisions aimed at enhancing operational efficiency and customer satisfaction.

Saudi Aramco’s $12 billion stock offer sells out in hours

The $12 billion share offering by Saudi Aramco was fully subscribed quickly after it opened on Sunday, which is good news for the government, which is looking to raise money to support a significant economic transformation plan.

UAE announces an annual noon work ban to protect workers starting from this date

In a steadfast commitment to safeguarding worker health and well-being, the Ministry of Human Resources and Emiratization of the United Arab Emirates (UAE) has reinstated its annual noon work ban.

UAE, Qatar sign agreement to prevent double taxation

The United Arab Emirates and Qatar have recently entered into an agreement aimed at preventing double taxation and combating fiscal evasion of income taxes.

Abu Dhabi Chamber unveils UAE Digital Commerce and Innovation Growth Plans

A study showcasing the substantial expansion and promise of digital commerce in the United Arab Emirates was released by the Ministry of Economy and the Abu Dhabi Chamber.

UAE Cybersecurity unveils strategies for secure remote work

The UAE Government Cybersecurity Council is sounding the alarm on the pressing need to fortify remote work environments.

Dubai World Trade Center unveils the Work-from-Home License Initiative

Dubai World Trade Center (DWTC) has introduced commercial license packages tailored for remote work within "Expo Village," situated in the vibrant Expo City of Dubai.

UAE President announces his visit to China on this date

The UAE President, Sheikh Mohamed bin Zayed Al Nahyan, is scheduled to undertake a significant state visit to the People’s Republic of China, beginning on Thursday, May 30.

Emirates unveils a codeshare agreement with Avianca for expanded connectivity

Emirates, the esteemed Dubai-based airline renowned for its global reach, has embarked on a new venture in partnership with Avianca, a prominent Latin-American carrier.

UAE unveils the deadline date for emiratisation targets in private firms

Reminders on the deadline for enterprises with 50 or more employees to complete their Emiratization aim by June 30 were sent out by the UAE Ministry of Human Resources and Emiratization (Mohre) on Tuesday.

UAE warns against fake job ads in educational institutions

In the UAE, there has been a concerning increase in fake job advertisements on websites and social media platforms, falsely promoting employment opportunities in schools and universities.

UAE launches Blue Residency Visa to Champion Sustainability

Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister, and Ruler of Dubai, announced the initiation of a special visa, recognizing outstanding contributions to environmental sustainability.

UAE: Your Step-by-Step Guide for Residency Renewal

The General Directorate of Residency and Foreign Affairs in the United Arab Emirates (UAE) has announced adjustments to the residence and renewal fees, affecting both locals and foreign nationals residing in the country.

"Emirates Insurance" guarantees compensation for car agencies damage claims

The Emirates Insurance Federation announced that insurance companies are cooperating fully and are committed to compensating for damages sustained by car agencies according to the terms of their contracts.

uae prices: petrol prices in May are trending higher