BCA urges investors to 'de-risk in the near term as stocks are flying high'

Investing.com -- In its latest note, BCA Research advised investors to adopt caution as geopolitical turbulence and impending policy shifts contribute to market uncertainty.

"Investors should de-risk in the near term as stocks are flying high but face the turmoil of Biden's last months and then Trump tariffs," the firm wrote.

The aftermath of the U.S. election has triggered a wave of global political instability, adding layers of risk for markets. From North Korean troops assisting Russia in Ukraine, to NATO encircling a Chinese ship suspected of severing undersea cables in the Baltic Sea, to South Korea declaring martial law, geopolitical tension is escalating.

"The Biden administration's lack of credibility will continue to invite actions around the world from any players looking to preempt or prepare for the Trump administration," BCA explained.

Domestically, the political climate in South Korea exemplifies the turmoil. President Yoon Suk Yeol's declaration of martial law caught markets off guard, causing a selloff in the Korean won while government bonds rallied as safe-haven assets.

"Geopolitical and political turmoil on the Korean peninsula seldom moves markets for long, not even the Korean won," BCA noted, but they advised against buying the currency given upcoming uncertainties like Trump's tariff plans.

The research highlights that Trump's promise of tariffs on Day One of his administration poses "a near-term downside risk to U.S. and global stock markets."

Even if the tariffs are a negotiating tactic, the "threat of permanency" could spook investors, adding volatility, said the firm.

BCA concludes that "equity market volatility will rise further, not abate, in the near term" as global actors brace for the new U.S. administration.

Source: Investing.com