I do keep my eye on potential risk factors for equity markets in general, low volatility + increased geopolitical risks do worry me slightly as risk premiums may rise on investments globally, but does this mean one should just shun all investments together? No I’ve learnt from the past that while the Bears make the news, its the Bulls that make the money, but it doesn’t mean we shouldn’t ignore potential risks.
Low volatility suggests markets are complacent and not taking into account the prospect of bad news. Indeed, there is no shortage of potential triggers for more turbulence ahead.
To begin, geopolitical risk is clearly rising. If nothing else, last week’s tragedy in Ukraine demonstrated that the unrest in the eastern part of the country is far from over. Meanwhile, we are witnessing the continued fragmentation of Iraq and now a ground war between Israel and Hamas in Gaza.