Timing Change Is Everything
Difference Between Geopolitics & Macroeconomics
Despite our efforts to further tilt the world’s axis, our globe just keep turning as it has for years. The only difference is the speed at which we are all informed. Changes often happen and depending upon your information source you hear about them presented in a manner that suits their respective agenda.
I’m a fundamentalist first and a technician second. Macroeconomics and geopolitics in todays world are important, so is geoeconomics. While the leaders of the world sit back and determine their next “move” let’s take a look at the differences between the two and assess their roles in today’s investment arena.
Geopolitics Versus Macroeconomic
Geopolitics and macroeconomics are very distinct yet interconnected fields within the broader spectrum of social sciences, each of them focusing on aspects of basic global dynamics. Geopolitics studies how geography, politics and power intersect globally. It examines the relationships between nations, regions and other actors, looking at how factors like territory, resources, military capabilities and historical rivalries shape our international relations. Geopolitical analyses often focus on strategic considerations such as military alliances, territorial disputes and geopolitical competition.
Macroeconomics is economically concerned with the overall performance, structure, and behavior of an economy as a whole. It examines large-scale economic phenomena like national output, unemployment, inflation and growth. Macroeconomists tend to study interactions between various economic factors like consumption, investment, government spending and monetary policy. Overall this helps them understand the determinants of aggregate economic activity and enables them to formulate policies to achieve stable prices, full employment and sustainable growth.
While geopolitics and macroeconomics are distinct fields, they often intersect and influence each other in significant ways:
Trade & Economic Interdependence: Economic relationships between countries are influenced by geopolitical considerations, alliances and rivalries. Economic sanctions, trade agreements and investment flows are all shaped by geopolitical factors. Conversely, economic factors can also influence geopolitical dynamics, as seen in disputes over access to resources or competition for market dominance.
Globalization: Globalization offers intertwined economic and geopolitical issues more closely than ever before today. Economic globalization, characterized by the increasing basic interconnectedness of economies through trade, investment, and technology, has economic and geopolitical implications. Global economic power changes shift global influence with tensions disrupting global economic activity.
Resource Competition: Geopolitical considerations often play a very crucial role in the management and distribution of natural resources like minerals, oil and gas. Control over key resources is a source of major geopolitical competition and conflict. Economic factors, resource prices and availability, influence geopolitical strategies and alliances.
International Institutions and Governance: International institutions such as the International Monetary Fund, World Bank, and World Trade Organization play a significant role in both economic and geopolitical affairs. These institutions help shape global economic policies and provide a forum for international cooperation and conflict resolution, influencing both economic and geopolitical outcomes.
In summary, while geopolitics and macroeconomics are distinct fields with their own areas of focus, they are deeply interconnected and influence each other in the complex landscape of global affairs. Understanding the interplay between these two domains is essential for comprehending the dynamics of the modern world.
What Worldwide Events Mean Today
It’s best to begin this section with a question. What are your sources of information and why have you chosen them? It’s an important point in this discussion as several sources exist. I’ve found that investors and traders often align their sources with their own political beliefs. That’s not a beneficial approach as a general understanding to all different analyses is important. Ideas and positions change and these influence the world as it’s presented.
Yesterday served as an excellent example. While the United States and Israel remain attached “at the hip” many sources I listened to were more interested in presenting a bigger story about the political demonstrations occurring across the United States. In essence, they were broadcasting their opinions. That’s not only expected, it reinforces my belief that you watch and listen to what you believe in. I lived through the 1960s as those in the states were opposed to the Vietnam war. It was interesting to note that being in opposition did not start on the “front page”. As it’s influence accelerated in the media so did its meaning.
It’s important to take note of changes in society. Globally, this influence is important as it tends to structure the future. I did take note of what happened in the Middle East over the weekend and listened. JPM came out with a solid “recommendation” to buy Lockheed. I agreed and jumped on board as not only were they right, long term stock investments in the defense sector are important. I did not have enough of them and JPM’s opinion is one I follow. It was not my intention to make this investment when my day started but it just made sense. So does taking The Ticker courses as we discuss these issues in a way that benefits everyone. What we use and how we use information is critical. It enables change and change, if applied correctly is a good thing.
Macroeconomically Europe has acquired more than enough “arrows in its quiver” to start lowering interest rates. Most economists I follow thought this would be the case. In the past New Zealand has been the “leader of the pack” and undoubtedly they will follow. The United States, in particular in an election year will follow. I put all of that information in my decision tree and added to my long 30-year bond position as well as averaging up my USDJPY basis to a one point loss. I’ve placed more orders above the current price as over time the Japanese will have to raise interest rates while others in the world will lower theirs.
In essence, macroeconomics and geopolitics are in lockstep with each other. It is all in the way individuals look at and analyze them and that depends upon their “source”. If you keep an open mind to change you will see and hear it as it happens. While change is not always happening in the direction you desire, it’s important to note its direction and it’s more important to react to it.
This is not the first time David Bowie’s “Changes” has been featured and it’s not the last. Fifty-two years ago Bowie released this song. Its meaning today is much stronger in today’s world than it was in the 1970s. People get their information instantaneously and react to change more so as it happens. I prefer to listen to the “experts” and take a bit of time to react, that’s why I’m a long term position person at heart but I’m not at all afraid of change. I look for it but understand that often “change” is fleeting. When you take the time to listen and watch everything that’s “out there” then observe trends you’ll be in a better position to evaluate change. It’s how you react to it that makes a difference.