Our analysis suggests that the level of geopolitical risk will rise over the next few years. The trends that lead us to this conclusion are likely to also play out in 2025. Our Geopolitical Sentiment Tracker shows that more countries now have poor bilateral relations, while Russia’s ties with Iran, North Korea and China are deepening.
Key investment implications
Geopolitical developments are increasingly shaping the background against which leaders make market-moving decisions and the reasons behind trends affecting asset classes.
Economists must reflect geopolitics in their projections, and investors should work with forecasters and forecasts that do so, and consider position adjustments and hedging options.
Geopolitics is also responsible for the strong performance of safe haven assets, such as gold.
“As tensions grow, companies’ diversification – or ‘coping’ – strategies will become more apparent”
The ‘Great Power Competition’ between the US and China will persist. Protectionism, sanctions, export controls and tariffs will create more economic friction. Even though we have not yet observed a slowdown in global trade, this could change if US President Donald Trump implements a plethora of tariffs. Diversification efforts will grow, with exports taking different routes to their end markets.
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