FINANCIAL STABILITY: Sovereign Investors Calmer on Pandemic Risk vs. Geopolitical Risks
Posted on 12/22/2020
According to the latest SWFI Global Asset Owner Survey that was released in December 2020, the majority of respondents see geopolitical risk as the most potential risk toward financial market stability, supplanting viral pandemic risk. Prolonged low oil prices can stoke greater regional conflicts in both the Middle East and the Eastern European front. The viral pandemic risk and credit default risk options received an equal number of answers. The positivity of vaccine efficacy and distribution news seemed to calm long-term investors. COVID-19 has led economies to their deepest recessions and quickest recoveries. However, recent news of viral mutations in the coronavirus in Europe, could cause greater short-term impacts on companies year-end figures. With major central banks engaged in unprecedented stimulus, interest rate risk from respondents dropped this quarter. The December 2020 survey occurred during the month of November – during the U.S. presidential election and positive vaccine news.
From the previous period released in September 2020, the viral pandemic risk was the greatest threat toward financial market stability. Geopolitical risk and increased interest rate risk were the other popular choices in the previous survey.
The composition of U.S. government will be known in January 2020. Many financial forecasters expect a divided Congress to limit the President-elect’s legislative flexibility. With regard to geopolitical risk, how will U.S.-China relations appear in the next 2 to 3 years, or even Turkey-Levant relations?
The quarterly global survey polls only asset owners, which includes sovereign wealth funds, pensions, endowments, and other long-term owners.
The survey is available on the SWFI terminal (under reports) at www.swfi.com.
