Euphoria reigns in the financial markets, the world economy is growing, albeit at a moderate pace, but there is still cause for concern.
Against the backdrop of general optimism, geopolitics comes to the fore: it is geopolitical risks that will become the main alarm this year.
This is the opinion of Richard Thorill of BlackRock. However, this does not mean at all that all geopolitical news will automatically become bad news for financial markets.
BlackRock has its own indicator of geopolitical risks (BGRI), which assesses the degree of concern of the financial market with geopolitical risk.
It monitors the frequency of publications on geopolitical risks in the media and brokers' reports, analyzing the sentiments reflected in the text.
A positive result indicates that markets are more concerned with geopolitical risks than recent history, while a negative rating implies less concern.
Now BGRI is at its maximum since March 2015, while it is significantly higher than the beginning of 2017, when the markets were only trying to digest the victory of Donald Trump in the elections, as well as worried about the election results in Germany and France.
So is it worth worrying about the growth of the geopolitical risk indicator? Despite the growth, now the indicator is still significantly below the long-term maximum, however, BlackRock believes that the current protectionist policies pursued by the United States can be a very bad signal for the markets.
The company conducted an analysis since 1962 and came to the conclusion that geopolitical upheavals have only a short-term effect on the markets, while economic factors are still decisive.
Many market risks that bothered everyone at the beginning of last year did not materialize; in the results we saw strong results on stock exchanges. Now the situation is generally similar, but BGRI is higher. However, economic background remains confident, and BlackRock does not expect geopolitics to upset this trend.