We have entered a new geopolitical regime:
➡️ The world has faced cascading crises – from trade wars to Russia’s invasion of Ukraine and now war in the Middle East.
➡️ These have accelerated global fragmentation and the emergence of competing geopolitical and economic blocs.
➡️ The openness of countries to trade with each other has stalled, based on world trade as a share of global GDP, a marked departure from the globalisation and geopolitical moderation of the post-Cold war period.
Our prop Geopolitical Risk Indicator (chart, link in comment) shows more attention is being paid to geopolitics. But geopolitical risk premia in markets is still pretty flat. Such is the old playbook – indiscriminate buy the dip when something happens – while a more selective, deliberate, new playbook is needed. The interplay with tech and AI, another megaforce, means greater need for selectivity, not less.