The uneven benefits arising from political certainty: A bad political environment will hurt your portfolio, but a healthy and beneficial political situation is only a prerequisite for investing success
A lot of people in finance and the investing world love to talk about politics and the geopolitical environment. They say how important it is for there to be a stable geopolitical environment for economies to perform well. This is true, but it leaves out too many vital details - a more useful understanding can easily be obtained.
Geopolitical certainty is less a beneficial item for investing and economic success - it's more of a prerequisite for a stable economy and an attractive environment for business. Geopolitical certainty is more of a necessary condition for good things to happen, NOT a sufficient condition. This means you need political certainty and a healthy geopolitical environment for business and the economy to be strong, BUT having a great political climate won't really help your portfolio.
The reason for this uneven distribution of benefits is because stocks aren't valued based on the geopolitical landscape - they are valued based on anticipated future cash flows, discounted at appropriate discount rates. Politics can influence this a bit, but far more so in the negative direction than in the positive one.
So, don't overdo it on how much you focus on politics, the global political landscape, and how this might impact your portfolio. A better approach is to monitor for signs of a terrible geopolitical situation on the horizon while prudently picking excellent investments to put your money in.
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