I recently had a conversation with an experienced investor that struck a chord with me.  I started talking about the implications of Brexit and other geopolitical issues and he cut me short saying he really didn’t have an interest in such issues as they were just “noise” in the markets.  He restricted his investing to his domestic markets of North America. This limiting attitude is unfortunately not uncommon and, I believe, will prove to be increasingly self-defeating in the years ahead.

The February 2019 issue of the Global Investment Letter marks the second anniversary of the launch of the Global Investment Letter in February of 2017 in response to the demand created by the articles I wrote and posted on LinkedIn for several years.  From the very start, we have built global thinking into our calls and recommendations.  Just a few examples over the past four years would be…….

• Our view that U.S. dollar denominated assets, especially equities, will be the best performing asset class for some time (in 2015, we published an article entitled “The Best Investment Over the Next Five Years”, available in the free content area of our website, suggesting that U.S. dollar denominated assets would outperform over the subsequent 5 years….and reiterated that view in our very first issue of the Global Investment Letter)
• Our negative view on the euro (first published in July of 2015 in an article entitled “Will the Euro Ultimately Collapse,” also available in the free content area on our website)
• Our highlighting of the potential opportunities available in the defence sector (recommended in our inaugural February 2017 issue of the Global Investment Letter: “Potential Opportunities in the Defence Sector” available in the sample issue area of our website)
• Our recommendation regarding the long-term investment opportunity we saw in India’s market (highlighted in the May 2017 issue of the Global Investment Letter: “India: A Long-Term Growth Opportunity” also available in the sample issue area of our website)

A major limitation that far too many investors place upon themselves is thinking purely in local terms.  Despite the easy access to news through the internet and the ease of global investment through instruments such as ETFs, most investors restrict their activities to their domestic market. This restriction both lowers potential returns and raises risk.

My years as an investor have taught me that all markets are inter-connected and, therefore, should be considered. The study of international markets, and different asset classes, not only provides new investment ideas but helps put our own domestic markets in context.  As Kipling said, “What can he know of England, who only England knows?” Just as physical travel is broadening, so is travel in the realm of ideas.

It is naïve to believe that the turbulent global political trends, trade wars and mountain of debt the global economy is wrestling with will not have an effect beyond our own national borders. The coming years will have no shortage of drama and volatility, which is why the Global Investment Letter, in each of its monthly issues, considers geopolitical developments in addition to market analysis.  A short video on the home page speaks to our general thesis.

Getting back to Brexit. Brexit will certainly have an impact for residents of the U.K., but it will also have an impact, more generally, on the European Union.  There will be short-term and long-term effects, with the law of unintended consequences working overtime!

A potential opportunity in U.K. markets may well lie ahead with the Brexit deadline getting close. The most likely scenario is either a “hard” Brexit with no deal or an extension of the negotiation. Either event is capable of producing an emotionally driven market reaction in equities that could produce a low risk trading opportunity.   This, is another example of the type of opportunities available to those who think in international terms. 

In conclusion, I remind you that we live in a world of great risks, but also great opportunities. To avoid the risks and take full advantage of the opportunities, we need to think in international terms. The rewards are not only monetary, but intellectual, through a greater understanding of the world around us. 

The Global Investment Letter is a monthly journal of ideas and opinions about capital markets. Global macro considerations are the primary drivers of markets today and the Global Investment Letter is based on the principles that all markets are interconnected and that the economic and geopolitical issues we are experiencing have deep historical roots. The coming years will be even more challenging for investors and thus it will be even more important to stay attentive to geopolitical developments and have a good understanding of their potential consequences as they will no doubt influence investment returns.  

We invite you to view the videos, sample issues and articles posted on the website by clicking below. 

As we like to say, “Just one good idea a year is worth many times the subscription price….”.

 The Global Investment Letter is written by Jonathan Baird, CFA, a former Portfolio Manager with three decades of experience managing money and Lipper Award Winner.​