Rising inflation and falling equity markets around the globe paint a bleak picture of uncertainty. Investors are caught perplexed in the face of undulating geopolitical waves and worldwide market rebalancing.
The brunt of these macroeconomic events is largely borne by investors that have globally diversified portfolios. In a cursory examination of events, the return to the domestic market may seem viable and prudent.
As an investor, you might be tempted to curtail further dilution of your global investments in volatile geographies, but a deeper and provident assessment will state otherwise. In long term, your time in the market overshadows the ability to time the market.
Let's first check the reasons that have led to the current state of affairs:
Reasons that have contributed to the present economic state
● Aftereffects of the Ukraine-Russia war
The war has caused disruption in the global commodity supply chains and hikes in prices of energy, wheat, and metals, ending the fragile balance of the world’s imports and exports for a toss.
● High interest rates and economic slowdown
During the pandemic, large amounts of money were injected by the governments to assuage the economic slowdown. This sudden increase in money has only preponed the inflationary times, with high-interest rates escalating the pace.
● Market readjustment post the pandemic boom
Tech companies witnessed a huge influx of capital, resulting in inflated valuations in the pandemic. As the pandemic bubble burst, the market entered a readjustment phase filled with high volatility.
Let's explore the reasons why returning to the home market may not be the correct course of action.
Why global investments are still a better choice?
1. Exposure to developed and mature equity markets