The events unfolding in Afghanistan in front of the world’s eyes will now be added to the lost of issues to look out for for investors as markets take on board the fact that the Taliban has regained power.
This is what Nigel Green, chief executive and founder of deVere Group, as the Taliban seized Kabul, the capital of Afghanistan, from where thousands desperately tried to flee.
It comes as President Joe Biden made the decision to remove troops from Afghanistan following Donald Trump’s decision to withdraw US forces as part of an agreement between America and the Taliban.
Green does not however feel that the news coming out of Afghanistan will send an immediate shockwave through global stock markets.
“Investors are currently more focused on other key factors that could impact returns,” he said, adding that “these include the fallout from the delta variant of Covid, concerns about peak earnings, disappointing Chinese economic data, slowing growth, and this week’s publication of the minutes of the Federal Reserve’s latest meeting which could hint at a shift in policy.”
Green does however believe that the Taliban’s power grab will be on the radar of investors among a growing list of global issues.
“There will be questions regarding stability in the Middle East, the global influence of the U.S. and the mounting pressure on Biden, the prospect of increasing international terror threats, and the growing dominance of China’s renminbi,” said Green.
Early in trading in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4%. European markets are set to open lower on Tuesday as investors monitor the Afghanistan crisis. On Wall Street, U.S. stock index futures were slightly lower after the Dow and S&P 500 on Monday closed at record highs.
The deVere CEO concludes: “Investors will be monitoring the Afghanistan situation carefully as it could very likely have implications down the road.
“As ever, investors’ best tool to avoid risk and seize opportunities is to remain invested and ensure proper diversification across asset class, sectors, currencies and regions.”
Kristina Hooper, Invesco’s chief global market strategist, sees a Federal Reserve policy mistake and the Covid-19 delta variant as bigger threats to the US economy and stocks.
“This [Afghanistan] is certainly a human tragedy. It’s a disaster,” she told CNBC on Monday. “Yet, what we have learned time and time again is no matter how big the disaster [and] no matter how significant the geopolitical risk seems, it rarely has much of an impact on markets.”