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Afghanistan is a 'disaster', but these two market risks are higher on Invesco's radar

Invesco sees two risks, but a Taliban takeover in Afghanistan is not one of them.

Christine Hooper, the company's chief global markets strategist, sees the Federal Reserve's political error and the Covid-19 delta as bigger threats to the US economy and equities.

"[Afghanistan] is certainly a human tragedy. It's a disaster," she told CNBC's Trading Nation on Monday. "Nevertheless, what we learn over and over again is no matter how big the disaster [and] no matter how significant the geopolitical risk seems, it rarely has a strong impact on the markets."

According to Hooper, investors should focus on their long-term investment goals and instead keep a close eye on the Fed's spending cut plans.

"This is a significant risk because we could see the Fed taking steps too quickly to tighten policy," she said. "It could even hinder the recovery."

While Hooper believes the risk is minimal, she urges investors to be prepared for it .

"This is not the Fed of 2013. This is the Fed working very, very hard to communicate the smallest steps it will take," Hooper said.

She is also concerned about the delta fallout and data from Israel showing that the Pfizer vaccine is losing its effectiveness over time .

"This could mean that there has to be a very big effort in the US to get a vaccine before we even reach collective immunity," she said. "We just want to keep a close eye on this."

She believes the recent spike in the virus could cut spending on goods and services and slow economic growth.

China is "very attractive"

For risk hedging, one of Hooper's main concerns is emerging markets in Asia. This group includes China, which is struggling to cope with the economic downturn.

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"We've seen China doing some things, like reducing fiscal stimulus and enforcing some regulatory initiatives that it firmly believes in over the long term," Hooper said. "We are likely to see a slowdown in growth for a number of reasons, including a small revival of Covid-19. But the reality is that China is poised for sustained growth over the long term. So for those with a long enough time horizon, it's very attractive."

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