Set this page to:
Go to FERI in:
myFERI Economics Portal FERI Portal

FERI Markets Update April 2021 - Geopolitical Risks as Underestimated Danger

Bad Homburg, 04/19/2021
by Dr. Eduard Baitinger, FERI
  • Upward trend on the markets continues
  • Growing explosiveness of international conflicts
  • US counterparties increase pressure on President Biden

Positive economic data coupled with stable long-term interest rates and a US Federal Reserve that is sticking to its ultra-expansive stance have been creating very good conditions for risk assets for weeks. Investors have taken advantage of this sweet spot in the equity markets, causing prices to rise across the board in recent weeks. Led by the big tech stocks, whose valuations are being buoyed by stagnant long-term interest rates, some of the global equity indices have been able to reach new all-time highs.

Geopolitical Climate Intensifies

Although the market environment currently appears very benign, growing geopolitical tensions threaten to noticeably worsen the outlook for the rest of the year. The recent escalation in the Ukraine conflict, with massive troop mobilizations on both sides, poses the risk of major military confrontations in the region and could drag the US, as an ally of Ukraine, into a new war. Even more dangerous is China's threat of war against Taiwan. Here, in the worst case scenario, a direct confrontation between the US and China would be possible. China claims Taiwan, which is clearly inferior militarily, as its own and has repeatedly reaffirmed this claim in recent weeks through repeated military maneuvers. The US, for its part, is signaling its support for Taiwan through an increased military presence in the South China Sea.

Biden Under Pressure

The hopes of many investors and financial market experts that US President Joe Biden's moderate course would help reduce geopolitical risks have thus been dashed for the time being. In contrast to the erratic Donald Trump, Joe Biden is seen as a predictable and level-headed politician who tries to resolve conflicts by diplomatic means. Paradoxically, it is precisely these qualities of Biden's that make the unstable geopolitical structure even more uncertain. For the US president's reserved demeanor tempts his opponents all the more to "test" Biden and the US through provocations. The opponents are sounding out how far they can go without fearing negative consequences. However, until a new and somewhat stable equilibrium is found here, sudden escalations could occur at any time, as Biden would ultimately be forced to defend the interests of the US in an emergency. Against this backdrop, investors should keep a close eye on geopolitical developments in the coming weeks and months and adjust their portfolios in a risk-conscious manner.


About Dr. Eduard Baitinger

Dr. Eduard Baitinger has been Head of Asset Allocation in the FERI Group since 2015. He is responsible for quantitative asset allocation at FERI Trust, where he also manages and coordinates numerous research projects. In close coordination with the FERI Board of Directors and Chief Investment Officer, Dr. Heinz-Werner Rapp, he also represents the investment strategy of the FERI Group and its communication to clients and customers of FERI.

Before joining FERI, he was a research assistant at the University of Bremen and financial analyst for an asset manager. In 2010 he completed his studies at the University of Bremen, accompanied by a stay abroad in New York, as a graduate economist. In 2014, Eduard Baitinger received his doctorate with distinction on new approaches to quantitative asset management. Dr. Baitinger publishes regularly in academic journals and acts as academic reviewer.


About FERI

Founded in 1987 and headquartered in Bad Homburg, Germany, the FERI Group has developed into one of the leading investment houses in the German-speaking area. FERI offers tailor-made solutions for institutional investors, family assets and trusts in the following areas:  

The FERI Cognitive Finance Institute was formed in 2016. It is the strategic research centre and creative think tank of the FERI Group. The Institute focuses on innovative analyses and the development of methods for long-term oriented economic and capital market research. 

FERI and MLP currently manage assets of EUR 42.7 billion, including EUR 9 billion in alternative investments. The FERI Group is headquartered in Bad Homburg and has offices in Dusseldorf, Hamburg, Luxembourg, Munich, Vienna and Zurich.



Media relations contact

Katja Liese

Member of the Management Board

Corporate Strategy, Marketing and Communications

T +49 (0) 6172 916-3192

F +49 (0) 6172 916-1192

presse@feri.de

FERI AG

Rathausplatz 8-10

D-61348 Bad Homburg

Dr. Eduard Baitinger
Contact
Contact
Login
Languages
Katja Liese
Member of the Management Board
Corporate Strategy, Marketing and Communications

T +49 (0) 6172 916-3192
F +49 (0) 6172 916-1192
presse@feri.de

FERI AG
Rathausplatz 8-10
D-61348 Bad Homburg

Contact

Thank you for your message. We come back to your request.

Sorry, an error has occurred.

The secure code you entered is invalid.

Set this page to:
Go to FERI in:
CONTACT
Telephone
Contact
Katja Liese
Member of the Management Board
Corporate Strategy, Marketing and Communications

T +49 (0) 6172 916-3192
F +49 (0) 6172 916-1192
presse@feri.de

FERI AG
Rathausplatz 8-10
D-61348 Bad Homburg

Contact

Thank you for your message. We come back to your request.

Sorry, an error has occurred.

The secure code you entered is invalid.