Lead-Lag Report: From Nord Stream to Taiwan: Brandon Weichert on Global Flashpoints
The stock market is having a strong year. So far, the only thing that has derailed the market rally has been some geopolitical fears back in the spring.
Those events led to the market selling off about 6% peak-to-trough. And the geopolitical flare-ups also led to two “risk-off” Fridays ahead of the uncertainty of the weekend. While events have calmed down, a potential resurgence could occur at any time, and tensions could flare up again.
That’s why astute investors will consider potential global flashpoints and their implications.
For instance, Russia’s invasion of Ukraine led to an immediate jump higher in energy prices. Fortunately, that moderated. As did a jump in wheat, a major global commodity.
But other flashpoints are possible. After the Nord Stream pipeline was bombed, supplies from Russia to Western Europe were curtailed.
Such an act of sabotage could occur on another pipeline. If that happens, energy prices could not only rise, but stay higher.
A further escalation of conflict in Europe threatens a significant global market. And it also threatens to further draw in the United States. U.S. food and material aid continue to move into Ukraine, but the speed could greatly accelerate.
If tensions rise over Taiwan, the United States and China could potentially go head-to-head. Before a shooting war starts, however, economic sanctions will likely surge. That could lead to higher prices and shortages in both countries.