It’s the start of another year and once again politics looms large in the minds of investors. At this point in 2019, it was “hard Brexit” (not to mention the spectre of a Jeremy Corbyn-led Labour government). This year, it’s an escalation in the temperature of the conflict between Iran and the US. In this week's magazine, we look at what the latter could mean for markets and investors (we also look at the political fallout and delve into the workings of Iran’s economy ).
It’s worth remembering that geopolitics often doesn’t have the market impact that people fear. It’s easy to over-react, particularly when headline-writers have an incentive to grab our attention by being as aggressive as possible. Last year’s big concern is a case in point – for all of the hysterical columns that talked about “cliff edges” and imminent recessions, following the election of Boris Johnson last month we no longer need to worry about a Corbyn government and we should be heading for a relatively smooth Brexit (although there’ll be plenty of overhyped ups and downs throughout the process).
Similarly, there have been tensions in the Middle East for as long as I can remember. The latest bout is hardly something to shrug off, but nor is it the worst, not by a long way. It’s quite possible that by the end of this year we’ll all have forgotten all about Iran. Remember when we were all worrying about North Korea in late 2017? At the time, that was going to turn into World War III as well.
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However, the reaction to such incidents can be useful in terms of what it suggests about the market mood. This, I think, is where the real significance lies. Investors have been keen to shrug off the conflict, sending US stocks higher after an initial dip and continuing to act as if oil prices will remain capped by US shale production and frail economic growth. This is where I think they are too complacent, particularly on the latter point. Markets seem to believe we’ve already hit “peak oil demand”. Yet for all that the environment and climate change will increasingly provide interesting investment opportunities (Max King gives his take on one such investment this week), I’m pretty sure we’ll need fossil fuels for a while yet. Oil prices are one of the main things I’ll be keeping an eye on this year.
Tips for 2020 and zen investing
Elsewhere in this week’s magazine we have our usual roundup of the share tipsters’ New Year picks. As with any tips, you should view these as a starting point for further research rather than racing straight to your broker. I personally like the look of some of the stocks in the Daily Mail’s UK-heavy portfolio.
And if you are already failing in your New Year’s resolutions to be a more positive, centred human being, revel in Jonathan Compton's bracing dose of cynicism, as he looks askance at the faddish rise of the “happiness twins” – mindfulness and wellness. I’ve got nothing against the odd bit of meditation, but I agree with Jonathan when he suggests that, as an investor, you should focus on companies that are making genuine medical advances, rather than dressing up old business models with New Age-style flimflam (a prime example being last year’s trendiest company, WeWork). Jonathan suggests six healthcare-related investments to buy instead.
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