Two risks are high on Invesco’s radar, but the Taliban takeover in Afghanistan is not one of them.
Kristina Hooper, the company’s global market strategist, sees a political flaw by the Federal Reserve and the Covid-19 Delta variant as a bigger threat to the US economy and stocks.
“This [Afghanistan] is certainly a human tragedy. It’s a disaster, “she told CNBC’s Trading Nation on Monday.” But what we’ve learned over and over again, doesn’t matter how big the disaster is. ” [and] No matter how significant the geopolitical risk appears, it rarely has a large impact on the markets. “
According to Hooper, investors should focus on their long-term investment goals and instead keep a close eye on the Fed’s tapering plans.
“It’s a significant risk because we could see the Fed tightening monetary policy too quickly,” she noted. “It could even stifle recovery.”
Although Hooper thinks the risk is minimal, she encourages investors to be prepared for it.
“This is not the 2013 Fed. This is a Fed that is working very, very hard to communicate the smallest steps it will take,” said Hooper.
She is also concerned about the Delta fallout and data from Israel showing that the Pfizer vaccine has lost its effectiveness over time.
“That could mean that a huge effort has to be made in the US to get booster shots before we even get herd immunity,” she said. “We just want to watch it closely.”
She believes the recent surge in the virus could cut spending on goods and services and slow economic growth.
China is “very attractive”
In order to hedge the risks, the emerging markets in Asia are one of the most important activities of Hooper. It is a group, including China, that is trying to cope with an economic slowdown.
“We saw China do a few things, like reducing fiscal incentives and pushing through some regulatory initiatives that it is very confident about in the long term,” said Hooper. “We are likely to see a slowdown in growth for a variety of reasons, including a slight resurgence from Covid-19. But the reality is that China is positioned for strong growth in the longer term, time horizon, it’s very attractive. “
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