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Geopolitics and election-driven uncertainty is the biggest worry for sovereign wealth managers, according to a survey<\/a> from investment firm Invesco, published Monday. Over 80% of managers cite geopolitical<\/a> tensions as the largest short-term risk, and fragmentation and protectionism as the largest long-term risk, according to the firm\u2019s Global Sovereign Asset Management report, which surveyed central banks and sovereign wealth funds overseeing about $22 trillion in assets.\u00a0<\/p>\n Last year, inflation was top of mind for central bankers and sovereign wealth fund managers, with over 80% citing increasing prices as their largest short-term concern.\u00a0<\/p>\n A series of elections this year, including the upcoming<\/a> U.S. presidential elections in November, are fueling that geopolitical uncertainty. \u201cElections are a real unknown for the world economy, and could also have an impact on the inflation outlook,\u201d said one Western central banker quoted in Invesco\u2019s report.\u00a0<\/p>\n A more complicated geopolitical environment could complicate what\u2019s largely been a good year for sovereign investors. More than half of investors exceeded their 2023 revenue targets compared to less than 40% the year before, according to Invesco. Average returns rose to 7.2% last year, compared to a 3.5% decline in 2022. <\/p>\n But there\u2019s opportunity too. Over half of respondents to Invesco\u2019s survey believe supply chain diversification will help emerging markets. Latin America \u201ccould benefit from the ongoing supply chain reconfiguration,\u201d one Asian sovereign wealth fund told Invesco.\u00a0<\/p>\n Sovereign investors are also turning to gold, traditionally a safe asset. Over half of central bankers see gold as more attractive as an \u201capolitical asset,\u201d according to Invesco. Bankers are worried that foreign reserves are now being weaponized and at risk of being sanctioned and seized.\u00a0<\/p>\n Gold is a \u201cconfidence building-asset\u201d and a \u201chedge against the weaponization of currencies,\u201d one Asian central banker told Invesco.\u00a0<\/p>\n Unexpected election outcomes this year have already affected the markets.\u00a0<\/p>\n Indian stock markets briefly tumbled when India Prime Minister Narendra Modi failed to win a parliamentary majority, meaning he would need to work with other parties to secure his pro-business agenda. The NIFTY 50, which tracks 50 largest companies listed on India\u2019s National Stock Exchange, fell<\/a> 6% when results were announced in early June.\u00a0<\/p>\n French markets reversed declines <\/a>after the National Rally, a far-right party, failed to win a legislative majority in recent elections.<\/p>\n Investors are also closely watching the lead-up to November\u2019s U.S. presidential elections.\u00a0<\/p>\n On Sunday, President Joe Biden announced<\/a> that he would not accept the Democratic Party\u2019s presidential nomination, and endorsed Vice-President Kamala Harris in the race to defeat former President Donald Trump in November.\u00a0<\/p>\n Analysts are divided<\/a> on what this new uncertainty means for investors and the \u201cTrump trade,\u201d or an investment strategy focusing on<\/a> sectors, companies and countries expected to benefit from Trump\u2019s economic and foreign policies.\u00a0<\/p>\n \u201cThere was a lot of confidence about Trump winning, and markets won\u2019t like this new uncertainty,\u201d Gene Munster, co-founder and managing partner at Deepwater Asset Management, told Bloomberg<\/em><\/a>.<\/em><\/p>\n Gold prices edged<\/a> up slightly and the U.S. dollar weakened in early Asia trading, following Biden\u2019s announcement.\u00a0<\/p>\n<\/div>\n\nElection uncertainty<\/strong><\/h2>\n
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