Insight Investment

Executive summary

1) Traditional geopolitical risk from military conflict has been in decline, but the Russian invasion of Ukraine is a reminder that state-to-state conflict remains salient. At the same time, new sources of instability are emerging that are closer to home:

• Low trust in institutions
• Political fragmentation
• Generational divide
  
  

2) Once a problematic political development is on our radar, the potential transmission mechanism to markets needs to be identified. Not all problems will be impactful for markets; others may be significant but lack a transmission mechanism.

3) A review of key global issues:

• Low trust in institutions and political fragmentation are perhaps most elevated in the US with a meaningful risk that neither side accepts the result of the 2024 Presidential election – this would signal a breakdown in democracy with global contagion risk
• The Russia/Ukraine conflict is an example of a more traditional geopolitical event. It is systemic and the long-term consequences are still largely unknown but it signals a major disruption in the global system and the post-WWII institutions