Eye on Asia | How investors can ferret out risks from US-China trade conflict and the Iran and North Korea crises for a prosperous Year of the Rat

The smart investor will do well to loosen risk appetites for the first and final quarters, when trade war truce and US election results are likely to boost markets, but watch for heightened uncertainty in the second and third quarters from Iran and North Korea, and US electioneering

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After a fabulous 2019, where stocks, bonds and other investments climbed in concert, investors will have to manage their risk appetites in 2020 more carefully. Photo: AP

Published: 3:00am, 20 Jan 2020Updated: 3:20am, 20 Jan 2020

In the Year of the Dog, investors chased their tails over monetary policy. The Year of the Pig saw investors deep in the mud of the trade war between the United States and China. The Year of the Rat promises calmer days with the phase-one US-China trade deal signed and a Brexit plan materialising. But it could be a trap – which means time for a backup plan.

Consider the landscape. The issue of a potential trade war remains alive for US President Donald Trump’s re-election campaign under phase-two negotiations. This is a well from which Trump’s campaign will want to drink again and again in 2020.

But there is another front in US relationship woes with the rest of the world: its security issues with Iran and North Korea, which make armed conflict and security a new focus of investors’ attention.

Indeed, the new breed of politicians epitomised by Trump and British Prime Minister Boris Johnson are challenging not only domestic institutions and political conventions, but the very foundations of international relations and diplomatic rules. This disruption is set to continue in 2020.

But perspective and equanimity are needed. There is only a minute chance of a full confrontation between global military powers, and small regional armed conflicts typically have no lasting effect on economic fundamentals. Markets react but small conflicts tend to be isolated and short-lived. In the face of strong economic fundamentals, they actually turn out to be good buying opportunities.

.css-1m2rp1p{color:#34b8b5;}Eye on Asia | How investors can ferret out risks from US-China trade conflict and the Iran and North Korea crises for a prosperous Year of the Rat

Eye on Asia | How investors can ferret out risks from US-China trade conflict and the Iran and North Korea crises for a prosperous Year of the Rat