The next stock market crash might already have begun. Conflict in Iran is causing volatility and there might be more to come.
As a result, investors have stopped worrying about artificial intelligence (AI). But what should investors do right now?
Risks
The Bank of America‘s fund manager survey from February revealed investors saw AI as the largest ‘tail risk’. How quickly things can change.
Source: Hedgefund Tips
The data for March shows that geopolitics is the biggest concern for 37% of fund managers surveyed. And that makes sense.
There’s plenty for investors to be concerned about right now. At a basic level, higher oil prices increase costs for a lot of businesses. That, however, isn’t the full extent of the issue. There are concerns that existing tensions elsewhere could also escalate.
One example is Taiwan. With the US focused on the Middle East, there are some who think China might make a move for Taiwan. I don’t know how likely that is, but it’s hard to rule out entirely. And that means things could get even worse from this point.
What to do?
I was fortunate enough to interview former UK fund manager Charlie Huggins last week. And he told me what he’s doing right now.
In short: nothing. Market volatility makes it feel as though investors have to be buying or selling, but this is often a mistake. In general, I agree. But more specifically, I think that making a move just because of what’s going on at the moment is risky.
I don’t think there’s much point in trying to figure out how the conflict will play out. It might be over in weeks or extend for years. Put another way, the situation doesn’t feel like the new normal. And that makes it different to AI, which does look like it’s here to stay.
I’m therefore not buying or selling anything based on a specific view about the current conflict. But I do also see an opportunity…
An opportunity
Shares in FTSE 100 events company Informa (LSE:INF) are down 10% in the last month. But that’s not because of oil prices.
It’s because the company has been targeting the Middle East as a growth opportunity. And it’s already had to reschedule events in the region. That incurs costs, which obviously isn’t good for the firm. But the bigger issue is that it makes it hard to IPO its joint venture with Dubai World Trade Centre.
None of that is good. Importantly though, Informa’s key assets are the events in its portfolio and these should retain their long-term value. Events were hugely disrupted by the pandemic, but the company bounced back strongly and I think there’s a lesson here.
The disruption’s real, but I believe it’s also temporary. And that’s why I’m looking to take advantage of the drop and add to my investment.
What happened to doing nothing?
Is that a way of doing nothing? Not exactly – but I think it’s in the spirit of what Huggins told me. I haven’t started buying Informa shares just because of the conflict. I’ve owned it for a while and been looking for opportunities.
In other words, I’m sticking with my long-term strategy. Whichever way things develop, I’m pleased to be buying Informa shares at today’s prices.
