The Impact Of Global Events On The Economy And Investment Decisions
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Let’s face it; we’re past the first quarter of 2023, and it’s not looking great. The war for Ukraine shows no signs of de-escalation, prompting Russia to send special forces to Bakhmut just recently. While global conflict thrives in this gloomy post-covid world, the markets fall into a turbulent pit.
Global events can steer the course of the world market in many ways, which is why it’s so important to learn how they affect our economy and investment decisions. After all, the war might not impact humanity as a whole, but the world market does.
How The Ukraine War Has Impacted The Market
Like most wars, the Russia/Ukraine conflict has directly impacted the food and energy industries. The two sovereign nations made up a significant chunk of the world’s wheat exports. Together, they were responsible for 14% of total corn shipments and a whopping 25% of global wheat exports.
25% might not seem like a lot if we micro it down, but it’s a significant portion that involves several nations on the global scale. Some of these countries, like the Republic Of Congo, depend on the Black Sea region for 67% of their wheat imports. Wheat prices have soared in the DRC, forcing its citizens to think of a replacement for their staple food.
On the Energy forefront, we come to the world’s natural gas and crude oil supply. As we know, Russia holds a 9% stake in the world’s natural gas industry and an impressive 14% crude oil share. The energy sector has obviously gone through a series of volatile changes after the Russian gas pipeline scandal.
The Coronavirus chocked the economy to a standstill for quite some time, igniting massive after-effects which have been felt by global conglomerates and small businesses alike, especially when they were just starting to pick themselves up. The Ukraine war only made things worse, and with the threat of China looming around the corner, the future looks bleak.
The Drop Of The Dollar; And How It Affects Global Investments
The dollar drop is another global event that will shape the future of the world economy. With the BRICS coalition publicly declaring the dollar drop, the world wonders how this will play out.
The dollar has dominated the global market for generations now. However, as with every mega currency before, it seems to have run its course. This could mean a significant weakening of the USD, which will undoubtedly have considerable effects on the world economy.
If BRICS can form their own currency, investors with a stake in those nations will see huge economic growth. This will undoubtedly prompt many to make even more investments in those regions. Over time, we could witness mass development in the infrastructure and IT sectors.
But the question on everyone’s mind is, what happens to the rest of the world if Brazil, Russia, India, China, and South Africa pull this move?
Well, assuming there will be a massive decline in the USD, North America could be approaching a tough time. This will dry certain aspects of their economy, so they must buckle up for what’s to come. Investment opportunities might be pulled from Western Europe and the USA and redirected to BRICS nations.
Overall, the dollar boycott is great news for certain parts of the world that have been facing economic disadvantages for a long time. But will we be able to survive the after-effects?
What Does The Future Look Like?
Although there will be a turbulent phase in the market, we think things will eventually simmer down. The world economy will become more stable once the BRICS transformation has been completed. However, this will definitely mean a certain level of stagnation for the Western world and its economic domination.
That said, the East isn’t free from problems either. Crude oil prices are bound to balloon in the future. The figure might be something small like 7-8%, but its impact will be absolutely massive. For example, an increase in crude oil prices implies an increase in manufacturing and transportation; and, ultimately, fewer exports.
Global conflicts also impact economic stability, and the East has many future conflicts brewing in the pot. The Chinese invasion of Taiwan continues to be a threat, and even more so in 2023. Moreover, they don’t have the best relations with India either.
Without political stability, the East is susceptible to global conflicts, which could drive away investment and growth. So unless there’s a strong peace in the region, the growth which comes from BRICS might be short lived.
What are some examples of global events that can impact the economy and investments?
Global events such as natural disasters, political upheaval, trade wars, pandemics, and terrorist attacks can impact the economy and investment decisions.
How do global events affect the economy?
Global events can disrupt supply chains, impact consumer and business confidence, affect currency exchange rates, and lead to changes in government policies and regulations that can impact economic growth and stability.
How do global events impact investment decisions?
Global events can impact investor sentiment, leading to market volatility and changes in stock prices, interest rates, and other investment factors. Investors may need to adjust their investment strategies to reflect changing market conditions.
Should investors react to global events by buying or selling investments?
It depends on the specific event and its potential impact on the economy and investment markets. It’s important to consult with a financial advisor and consider the long-term implications of any investment decisions.
What are some strategies for investing during times of global uncertainty?
Diversifying your portfolio, investing in defensive sectors such as utilities and consumer staples, and considering alternative investments such as real estate or commodities can help mitigate the risks of global uncertainty.
How can investors stay informed about global events and their impact on the economy and investments?
Investors can stay informed by following news outlets, monitoring market trends, and consulting with financial advisors. They can also use online tools and resources to research and analyze investment opportunities.
How do global events impact different types of investments, such as stocks, bonds, and real estate?
Global events can impact different investments in different ways. For example, stock prices may be more volatile during times of global uncertainty, while bonds may be viewed as a safer investment. Real estate may also be impacted by economic conditions and government policies.