Geopolitical uncertainty and your investments: What to consider now

Businessman standing in office looking out the window.

Global uncertainty can add risk for investors. Here’s help with maintaining perspective.

Photo of Adam Taback
Adam Taback
Head of Private Wealth Investments
Wells Fargo Wealth & Investment Management

Geopolitical conflicts are happening in various parts of the world, and there are concerns that they could expand or that new ones could begin. The Federal Reserve has hiked interest rates at record speed and the tension of the 2024 presidential campaign is only starting to escalate. Meanwhile, Wells Fargo Investment Institute believes the U.S. economy will weaken further in 2024.

With all this uncertainty, here are five portfolio considerations to help you be smart about the markets.

1. Put it in perspective.

History tells us that the markets move in response to major geopolitical events but that the impact tends to be short-lived. Since World War II, the S&P 500 Index has responded to new cross-border conflicts and acts of terror by falling an average of approximately 4% in the roughly two weeks following the incident and then recovering in about a month.1

In 2023, markets have been largely looking past geopolitical turmoil. Measures of market volatility, such as the Chicago Board Option Exchange (CBOE) Volatility Index (VIX), which we would expect to rise in times like these, have largely remained below long-term historical averages.2

We believe that global capital markets do evaluate global conflicts but consider serious escalation as unlikely. It’s a good reminder to weigh both the scenarios and their likely probabilities. And there are steps investors can take now, even if conflict worsens.

2. Have a plan and stick to it.

How I favor managing today’s geopolitical risk and uncertainty is not a lot different than during any other period: Have a diversified strategic asset allocation that’s built around your risk tolerance and long-term objectives, and stick to it. Beyond that, I think it’s important for investors to know the answers to two questions: How much of a drawdown can you stand, and how much liquidity do you need? When markets do pull back significantly, your portfolio should be designed to help ensure that you can manage your emotions through to the other side and that you have enough easily accessible funds to maintain your lifestyle during the downturn.

Periodically review your plan, especially if your circumstances change or with significant life events. Consider rebalancing often to reset your portfolio allocations to align with your long-term goals if they stray over time.

3. Manage your emotions.

Emotional reactions can lead to decisions that pull you away from your plan and negatively impact your returns. They can tempt you to try to time the market. It may feel good to say, “Things don’t look good, and I’m pulling out of stocks.” But, historically, that reaction has been highly unlikely to help achieve long-term goals.

Here’s why: Over the past 30 years, if an S&P 500 Index investor missed out on the index’s best 10 days, their returns would be 35% lower than a buy-and-hold peer. Miss the best 20 days, and you’d have lost nearly 60%.3 There’s always going to be something scary or uncomfortable going on in the markets or the economy.

4. Consider these tactical adjustments.

Your long-term strategic allocations will likely drive the majority of your returns over time. However, I believe you can improve your chances for better risk-adjusted returns through tactical asset allocation, or short-term adjustments based on expected relative performance.

The key word to keep in mind in our current investment environment is quality. Wells Fargo Investment Institute is bullish on high-quality U.S. large-cap stocks and U.S. investment-grade bonds, especially on the longer and shorter ends of the curve. It’s also why we hold a more unfavorable view of U.S. small-cap and emerging market equities.

If you’re a qualified investor, you may want to consider alternative investments to help diversify your portfolio. For example, private capital is designed to be well-suited to more difficult periods in the economic cycle, as is private equity. On the public equity side, it’s hard for companies to access capital amid high interest rates and debt levels. Private equity offers an opportunity to take advantage of that. Rather than investing in a company and hoping management can figure a way through the challenges they face, you can invest from the other side, strategically helping companies get out of difficult situations.

You also may want to consider a broad-based commodity exposure. Saudi Arabia and Iraq still provide roughly 20% of U.S. oil. Meanwhile, despite sanctions, Russia remains a key global supplier of grains, industrial metals, fertilizer, and energy.4 A modest commodity allocation could at least partially diversify against financial market price declines stemming from commodity price inflation if war in the Middle East limits oil export routes or if Russia takes more Ukrainian territory.

5. Talk to your advisor.

Every investor’s situation is different, so consider meeting with your advisor. You might discuss your plan and explore potential reasons to change it. You might find out how to diversify with alternatives or real assets, such as real estate or commodities.

In times like these, advisors can help you find emotional balance. They can play a very strong role, like a therapist, helping ensure that your behavior and emotions don’t get in the way of your portfolio. In other words, they can help you be smart about the markets.


1. “Why Markets Are Relatively Calm in the Geopolitical Storm,” Financial Times, October 2023
2. “Investors Are Unprepared for Stock Shocks, Wells Fargo Strategist Warns,” Yahoo Finance, December 2023
3. “The Perils of Trying to Time Volatile Markets,” Wells Fargo Investment Institute, September 2022
4. “Oil and Petroleum Products Explained: Where Our Oil Comes From,” U.S. Energy Information Administration, December 2023; “What Else Does Russia Export, Beyond Oil and Gas?” World Economic Forum, March 2022

Wells Fargo Wealth & Investment Management (WIM) is a division within Wells Fargo & Company. WIM provides financial products and services through various bank and brokerage affiliates of Wells Fargo & Company.

Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

Asset allocation and diversification are investment methods used to help manage risk. They do not guarantee investment returns or eliminate risk of loss including in a declining market.

Alternative investments, such as hedge funds, funds of hedge funds, managed futures, private capital, real assets and real estate funds, are not appropriate for all investors. They are speculative, highly illiquid, and are designed for long-term investment, and not as trading vehicle. These funds carry specific investor qualifications which can include high income and net-worth requirements as well as relatively high investment minimums. The high expenses associated with alternative investments must be offset by trading profits and other income which may not be realized. Unlike mutual funds, alternative investments are not subject to some of the regulations designed to protect investors and are not required to provide the same level of disclosure as would be received from a mutual fund. They trade in diverse complex strategies that are affected in different ways and at different times by changing market conditions. Strategies may, at times, be out of market favor for considerable periods with adverse consequences for the fund and the investor. An investment in these funds involve the risks inherent in an investment in securities and can include losses associated with speculative investment practices, including hedging and leveraging through derivatives, such as futures, options, swaps, short selling, investments in non-U.S. securities, “junk” bonds and illiquid investments. The use of leverage in a portfolio varies by strategy. Leverage can significantly increase return potential but create greater risk of loss. At times, a fund may be unable to sell certain of its illiquid investments without a substantial drop in price, if at all. Other risks can include those associated with potential lack of diversification, restrictions on transferring interests, no available secondary market, complex tax structures, delays in tax reporting, valuation of securities and pricing. An investment in a fund of funds carries additional risks including asset-based fees and expenses at the fund level and indirect fees, expenses and asset-based compensation of investment funds in which these funds invest. An investor should review the private placement memorandum, subscription agreement and other related offering materials for complete information regarding terms, including all applicable fees, as well as the specific risks associated with a fund before investing.

There are special risks associated with an investment in real estate, including the possible illiquidity of the underlying properties, credit risk, interest rate fluctuations and the impact of varied economic conditions.

The commodities markets are considered speculative, carry substantial risks, and have experienced periods of extreme volatility. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity.