International Tensions Mount
Asia appears to be in a state of flux as tensions between North Korea and South Korea intensified over the past weekend as China and the United States were pulled further into the conflict. The people of South Korea seem to be unified behind their stance of pushing back to prevent any future attacks, similar to what occurred last week, by North Korea. On the other hand, the people of North Korea, which many believe to be in possession of nuclear weapons, seem to not be backing down from any of the political or diplomatic pressures resulting from their recent actions.
Europe is also in its own state of flux, although in their case it is financial, not military. Ireland, the second of the P.I.I.G.S. (Portugal, Italy, Ireland, Greece and Spain) countries to need a European bailout in 2010, is the current European country causing great angst to the European economic and monetary union. The size of the bailout plan for Ireland is believed to be 85 billion Euros (roughly 112 billion U.S. Dollars) and concerns have now risen with respect to the financial stability of Spain and Portugal.
The turbulence in these two continents is having an impact on global stock and bond markets alike and, in our opinion at Hennion & Walsh, should serve as a reminder that:
1) The developed world is still dealing with some of the repercussions of the great credit crisis of 2008
2) Long-standing tensions between certain countries still exist as does the potential for a geopolitical or military event to occur
Accordingly, we believe that it is appropriate for investors, working with their financial advisors, to consider adding a wider range of asset classes to their strategies given the many uncertainties, such as the ones discussed here, within the markets in the months ahead. Asset allocation remains of the upmost importance, from our point of view, and should always be constructed in accordance with one’s investment objectives, investment timeframe and tolerance for risk. While past performance cannot guarantee future results, and asset allocation cannot ensure a profit or protect against a loss, applying a historical perspective and maintaining an appropriate strategic asset allocation can help provide comfort and direction to investors during periods of great volatility.