The markets are dealing with a new kind of political risk, one that all traders should be aware of and make trading decisions while factoring in the risk, said a global political analyst in an interview with The Industry Spread.
“Now we have things like Trump tweeting about the Chinese capturing one of their drones- and he tweeted in protest- and we see the markets in Asia have complete volatility,” said Klisman Murati, ‘International analyst at Global Risk Insights’, when he sat down with Katie Pilbeam, on IG Group’s Market Insights.
Murati, in a follow up interview with The Industry Spread, said that his comment should not be taken to mean that traders along with studying charts and trends should be glued to Twitter.
Trump is the most well recognized example of this dynamic; Murati said Trump “displays a sense of perpetual unpredictability,” in an article about the election in August.
Murati said because Trump has never held office before and is a clean slate so to speak, he has added political risk on the market that traditional politicians wouldn’t have.
Murati noted that Trump cannot be viewed in a vacuum but part of a phenomenon which includes Brexit, and the potential election of Marie Le Pen as part of a sort of new world order of unpredictable political risks.
Murati said that as the market adjusts some and eventually all this political risk would be built in, but until then, traders are presented with both risks and opportunities.
He noted that whereas 9/11 had a profound effect on global markets, more recent terrorist attacks, though no less tragic, have had a far less gyrating effect on the markets.
Murati told Pilbeam that another potential risk of Trump tweeting as that other world leaders will follow suit and send messages the same way, “If Marie Le Pen takes office in France, she starts to do the same thing what will happen to the markets,” Murati told Pilbeam.
But he also noted that the more Trump and other leaders tweet the more the market will begin to adjust and account for the risk.
While Murati believes there is both risk and opportunities in the unpredictable geopolitical climate, he doesn’t necessarily believe traders should become political junkies. His advice is more practical.
“An investor should spend more time learning everything about the industries they want to invest in and less time listening to speculation.” Murati said. “When you do this you start seeing how your industry can and will potentially develop in the future and that’s where we divide the real investor from the hopeful speculator.
He gave this tip: make friends with the people you are betting, real insight and investment comes from concrete knowledge and a flair for opportunity.