REPOST: Will geopolitical tensions derail markets?

Global equity markets had been bouncing back from early April’s lows as investors shifted their attention to the still relatively strong world growth outlook bolstered by favourable economic tailwinds such as the US corporate tax cut and rising employment.

However, the markets are now slumping again as new geopolitical risks emerge. Disruptive counterforces, including an escalating trade war, political showdowns in Europe and currency devaluations in Latin America are beginning to work against the synchronised global growth scenario which appeared to be in intact earlier this year.

The major averages are up slightly on the year, but that masks considerable variance between regions and sectors. For example, the tech-heavy Nasdaq market is up 9.5 per cent year-to-date, easily outperforming the broader S&P 500 stock index which has advanced by just 1.9 per cent as of this writing.

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