Geopolitics – Feature
The world is going through political changes not seen since the fall of the Berlin Wall which could lead to a major rethink in how investors construct their portfolios. Andrew Holt takes a look at what could lie ahead.
geopolitical risks. The indicator keeps the US-China strategic competition risk rating at a high level. “We see the trajectory of US-China relations as decidedly negative and believe it pre- sents significant risks for investors,” Donilon says. Tomlinson agrees. “The big relationship is the long-term evo- lution and relationship between China and the United States. Going back 10 to 15 years, there was a strong relationship between the two that worked – it had consequences, with US manufacturing hit hard – but there was a symbiosis there.” That isn’t the case now. “There is a different political backdrop in the US and a different global situation,” he adds. “America is deliberately changing its geopolitical role,” Tomlinson says, adding that this is likely to have stark outcomes. “The world could easily divide into two power blocs, essentially amounting
to authoritarianism versus democracy,” Tomlinson says. The risk indicator also maintains the likelihood of high tensions in the Gulf also being a component part of the geopolitical risk supercycle. “The potential resumption of diplomatic relations between Saudi Arabia and Iran should support regional stabil- ity yet concerns over Iran’s nuclear program have raised the risk of a military confrontation in the Middle East to its highest level in nearly a decade,” Donilon adds. And probably the most worrying assessment is Blackrock’s high likelihood rating for a Russia-NATO conflict. “We see no resolution on the horizon as Russia and Ukraine pursue spring offensives,” Donilon says. “We see a substantial risk of escala- tion in the most dangerous standoff between the West and Russia since the Cuban missile crisis.”
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