A WELL-respected equity fund manager once said to me that he spent about 10 minutes of his day thinking about politics and macroeconomics and that was 10 minutes “wasted”. Personally, I think he was wrong.

Yes, the price you pay for an investment and the holding period matter immensely, but politics affect the economy, the economy affects a company’s sales, sales drive a company’s profits and profits ultimately drive a company’s share price. An investor has to think about both the political issues and the economic implications when judging how much to invest in certain regions, asset classes, sectors or companies.

It should therefore be considered worrying that political risks for financial markets appear to be as high now as they have been since the end of the Cold War. Let’s hope the reference to the Cold War is not fitting, with an increasing number of people referring to the deterioration of the relationship between the US and China. Certainly the increasingly fractious relationship between the G2 economies, namely the US and China, appear to pose the greatest risk to the world over the next few decades. In the short term, we expect a deal of sorts to be announced over the trade situation, but longer term how the US and China get along will be vital for the global economy and, by implication, financial markets.

Many other political risks currently exist, from the sclerotic and unpredictable Trump administration and never-ending saga over the UK’s departure from the European Union to the obvious divergence in views amongst European leaders and the rise of strongmen leaders in Russia, Italy, China, Brazil, Turkey and the Philippines. Each creates uncertainty over policy making and therefore less predictability for investors.

Another key factor for investors to ponder is that we appear to have come to an end of the golden age of globalisation. The period that ran from the start of the 1990s to the Great Financial Crisis was a period of intense globalising of national political, economic and financial interests, but that ship ran aground in the financial crisis and appears to be sinking before our eyes.

Nationalism is now all the rage, implying that the age of globalisation has become the age of localisation. The rise of extreme parties across Europe and the revolt against perceived globalists are signposts for where the world is going. If we think it is bad now, wait until the next big economic downturn and the moment when the central bankers and politicians want to bail out the rich at the expense of the poor once again.

There is also no doubt that markets became more political in the Great Financial Crisis and the recovery years that have followed. Clearly this makes sense when you understands that the modus operandi of various central bankers around the world has been to inflate asset prices to benefit those consumers lucky enough to have exposure to financial or property assets. This has led politicians to take an ever-closer interest in the path of financial markets, with the most obvious example being the obsession that Donald Trump has had with the US equity market

For investors, an increasingly volatile political environment means a world with less stability. Where there is less stability there will be less confidence. Where there is less confidence there will be a reduced willingness within companies to invest in their businesses in overseas countries. This will lead to lower growth rates and increasing volatility in those rates. Our view is that taking excessive risk within investment strategies at this time, while valuations are not overly cheap and political risks are elevated, would be wrong.

That doesn’t mean you shouldn’t invest, but rather that you should be more selective - an increasingly fractured global economy and political environment, where nationalism trumps globalisation, will also bring opportunities.

Tim Wishart is head of Scotland at Psigma Investment Management.