THIS WEEK’S FOCUS

How Geopolitical Shocks Shape Markets—and Your Money

You’re scrolling through the news, and suddenly there’s a headline about a trade war, a pipeline explosion, or a major country defaulting on its debt. Sounds stressful, right? Well, global markets feel that stress too—and it can hit your portfolio hard.

Geopolitical risks are like financial earthquakes: unpredictable, powerful, and capable of creating ripple effects across the globe. But here’s the thing: with the right strategy, you can build an investment plan that’s as resilient as a skyscraper in an earthquake zone.

Let’s break it down so you can stay one step ahead of the chaos.

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A STRATEGIC OPPORTUNITY FOR INVESTORS

Spotlight Strategy: Investing in Argentina

Argentina’s recent fiscal triumph—ending its deficit for the first time in 123 years—has transformed it from an economic cautionary tale into an emerging market powerhouse. This shift is more than just good news for Argentina; it’s an investment opportunity with global implications.

With economic stability paving the way for growth, sectors like financial services, energy, and utilities in Argentina are gaining momentum. The question is: how can savvy investors tap into this resurgence while managing risks effectively?

Enter our strategy, Investing in Argentina.

Strategy Overview: Investing in Argentina’s Rebound

This investment strategy capitalizes on Argentina’s fiscal and economic reforms by spreading funds across eleven Argentine stocks, each receiving equal allocation (9.09%) to ensure diversification. By focusing on multiple sectors—financial services, energy, utilities, and more—it mitigates risk while capturing growth across the economy.

• Diversified Exposure: Financial services dominate the allocation at 37%, reflecting Argentina’s strengthening banking sector. Energy and utilities each hold significant positions, riding the wave of the country’s booming natural gas exports.

• Rebalancing Frequency: Allocations are revisited every 30 days, ensuring the strategy adapts to market changes.

Why Argentina’s Recovery Matters for This Strategy

1. Sectoral Strength:
   Argentina’s fiscal turnaround is driven by natural gas exports, rising foreign investment, and reforms in its financial sector. This strategy captures these gains by including key players like Pampa Energía (PAM) and Banco BBVA Argentina (BBAR).

2. Currency Potential:
   The Argentine peso, long plagued by instability, has a chance to recover as fiscal policies stabilize. This could enhance returns for dollar-based investors holding Argentine equities.

3. Economic Reforms:
   Ongoing reforms are likely to attract global investors, increasing demand for Argentine stocks and potentially boosting their valuations.

Performance Highlights

• Annual Return: 31.33%—outpacing many developed market benchmarks.

• Drawdown Control: A balanced approach across sectors helps limit losses during market corrections.

• Alpha Generation: The strategy demonstrates a high alpha capacity, signaling its potential to outperform the market over time.

Argentina’s Big Picture for Investors

Argentina’s story isn’t just about numbers; it’s a reminder of how markets can evolve dramatically. For investors, this strategy provides a way to take advantage of the country’s economic rebound without putting all your eggs in one basket. By diversifying across sectors and rebalancing regularly, it positions you to benefit from Argentina’s long-term growth while mitigating risks from short-term volatility.

As with any investment, consider your goals, risk tolerance, and time horizon. With Argentina’s fiscal success creating new opportunities, now might be the time to explore how its resurgence can play a role in your portfolio.

MARKET RIPPLES

1. The Domino Effect of Geopolitical Risks

When a geopolitical crisis hits, it often starts with localized effects but quickly spreads across industries and borders. Here’s a closer look:

• Energy markets: Conflicts in oil-rich regions (e.g., the Middle East or Russia-Ukraine) can spike oil prices, triggering inflation and hurting consumer spending worldwide.

• Global supply chains: Events like the U.S.-China trade war or COVID-era port closures disrupt manufacturing and delay goods, driving up costs and shaking investor confidence.

• Capital flight: Political instability in emerging markets can lead to foreign investors pulling out en masse, crashing local currencies and markets.

📊 Stat to Know: During the 2022 Russia-Ukraine crisis, Brent crude oil prices surged by over 50% within weeks, pushing global inflation to record highs.

EVERY CRISIS HAS ITS WINNERS AND LOSERS

2. What Sectors Sink—and Which Ones Soar

Here’s how different industries typically react to geopolitical events:

• The losers:

  • Travel & leisure: Wars, pandemics, and political unrest often result in decreased tourism and disrupted airlines.

  • Tech: Global supply chain disruptions and sanctions can hit semiconductor and hardware production hard.

• The winners:

  • Defense: Rising military tensions usually mean increased government spending on defense contractors like Lockheed Martin.

  • Energy: Oil and natural gas producers benefit from rising prices during supply disruptions.

  • Precious metals: Gold, the ultimate “safe haven” asset, tends to shine during periods of geopolitical uncertainty.

💡 Takeaway: Investing in sectors like defense and renewable energy could provide a hedge against geopolitical shocks, while gold can serve as a short-term safe haven.

WHY YOUR DOLLAR ISN’T AS UNTOUCHABLE AS YOU THINK

3. The Currency Chaos You Can’t Ignore

Geopolitical risks often cause massive currency fluctuations:

• Trade wars: Tariffs and sanctions weaken affected currencies, making imports more expensive and stoking inflation.

• Global instability: During crises, investors tend to flock to “safe haven” currencies like the U.S. dollar, yen, or Swiss franc, leaving other currencies to plummet.

💱 In 2016, the British pound dropped by nearly 20% against the U.S. dollar following the Brexit vote, making imported goods more expensive for UK residents while boosting exports.

✅ What You Can Do: Hedge your portfolio with international ETFs or funds that benefit from currency diversification.

THE DOMINO EFFECT YOU DIDN’T SEE COMING

4. How Geopolitics Affect Central Bank Policy

Geopolitical tensions don’t just disrupt markets—they influence how central banks respond. Rising energy prices or trade instability can fuel inflation, forcing central banks to:

• Hike interest rates: To combat inflation, which can slow down economic growth.

• Cut rates: To stimulate growth during periods of geopolitical uncertainty or conflict.

This creates a balancing act for your investments, as rate changes impact stocks, bonds, and even your mortgage.

📈 Pro Tip: Keep a close eye on Fed announcements during periods of global tension. Strategies that perform well in volatile environments can help you pivot faster than trying to adjust your portfolio manually.

PREPARATION > PREDICTION

5. How to ‘Future-Proof’ Your Portfolio

Geopolitical risks are inevitable, but you don’t need a crystal ball to protect your investments. Here’s a step-by-step guide:

1. Diversify, diversify, diversify:
   Spread your investments across sectors, asset classes, and geographies. A portfolio heavy in U.S. tech stocks might seem safe until the next trade war with China.

2. Consider defensive assets:
   Bonds, precious metals, and cash-equivalent funds act as financial life rafts when markets are choppy.

3. Automate your strategy:
   Platforms like Surmount use data-driven models to identify risks early and adjust allocations automatically—taking the stress out of managing your portfolio.

4. Stay informed, not overwhelmed:
   Focus on the big-picture trends rather than reacting to every headline. For example, long-term geopolitical risks like the U.S.-China rivalry may warrant different strategies than short-term shocks like a regional conflict.