Given uncertainty in geopolitics, climate and artificial intelligence, stick with diversified investment strategies, said Richard Haass, senior counselor at Centerview Partners and president emeritus of the Council on Foreign Relations, on Feb. 12 at the Exchange ETF conference in Miami Beach.
"I think you all have to assume a far more turbulent, choppy environment that could be punctuated by the odd conflict, by worsening global conditions and so forth," Haass said to an audience of investment professionals at the conference. "So you're going to have to think, I would argue, about investment strategies that don't place disproportionate numbers of eggs in any basket."
Diversification has become "more important than ever," given Russia's aggression in Ukraine, the Israel-Hamas war, China's growing military capability and other threats, Haass contended, adding that "one has to look at specific geographies and specific areas because … not all are equal."
As the world starts to emerge from the COVID-19 pandemic, "the more immediate global challenge (and) long-lasting one is climate change," he said. "And what things like COVID and climate have in common is that there's a gap between the scale of the challenge and the scale of the existing international response."
"If there's a hope in climate…I think it's going to come from technology," Haass said, adding that technology like mRNA vaccines and Zoom helped the world get through the pandemic.
Other areas of technology, such as AI, "have tremendous potential to do good and they have tremendous potential to do ill," Haass said, but he worries there will be a struggle to balance that.
"What you want is a world in which we encourage the emergence and the sharing of that (which) can do good, and we push back and regulate against that which can do ill," he added. "I'm not real confident we're going to be able to do that."
The SEC proposed a rule in July to require investment advisers and broker-dealers to "eliminate or neutralize" conflicts of interest that arise from the use of certain technologies, including AI, in investor interactions. However, many industry groups have pushed back on the rule, and two Republican senators introduced a bill last week to block the SEC from finalizing, implementing or instituting the rule or anything similar.
Overall, Haass asserted, "the biggest single uncertainty in the world right now" is the United States itself, both domestically and internationally.
"There's not much of a consensus about America's role in the world, and also there's real questions about the functioning of American democracy," he said, pointing to continued gridlock and the use of stopgap funding bills in Congress.
A lot of things come down to the outcome of the November election, Haass contended, as things could change for both the U.S. and the rest of the globe depending on who wins the presidency.
"It's a globalized world; virtually everything is connected, and for better or for worse, it is a more uncertain world," which should be a factor when it comes to investing, he said.
