We are now firmly in the riskier, messier, more factious world we predicted. While the US president is not the cause of the geopolitical shifts underway over the last few years, his administration is accelerating some drivers. For example, tariffs are intensifying economic friction, while the reduction of US commitments to Europe’s security and ambitions in space are contributing to a new arms race. The US, under Trump, also emerged as an additional disruptor.
Geopolitics is changing the macro and market environment
As investors, we need to look at geopolitical risk like we look at debt. High debt levels do not need to result in a debt crisis, but they increase vulnerabilities. Geopolitics is also changing the macro and market environment. The current level of US domestic political uncertainty alongside geopolitical risk alters how companies, consumers, and investors make decisions, which then has economic, and again political, implications. This uncertain backdrop will shape the next twelve months.
Politics will continue to hit global investors where they are most exposed: in US assets. Concerns over the US’s fiscal position will linger, alongside doubts over how the US will weather the changes underway. Domestic politics will remain volatile as Trump will double down on societal issues that rally the MAGA base as mid-term elections approach.
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