• The geopolitical impact on the markets

Geopolitical risk is increasing and investors will have to take it increasingly into account over the coming years. Our analysis attempts to shed light on how it can impact portfolios and what strategies investors can use to manage it.

Two factors drive geopolitical risk

• The growth of China

Within ten years, China’s GDP will have an equivalent weight to that of the US in the world economy. This fact has important consequences for the relations between both countries and, above all, for the attitude of the United States towards international treaties and institutions.

• The rise of populism

The underlying causes of this phenomenon are wage stagnation and increasing inequalities in developed countries. Populist parties have been able to take advantage of discontent through economic nationalism, which blames the poor economic situation on globalization, and, more specifically, on imports, the outsourcing of services and immigration. With this argument, protectionism, the withdrawal of trade agreements and restrictions on the entry of immigrants are justified. It is clear that these types of policies will increase political risk, since countries will have to redesign their alliances, will be less interconnected and less dependent on each other.