Jan 25, 2019

Market volatility shows strains of widespread geopolitical tensions

Illustration: Lazaro Gamio/Axios

The U.S. stock market has seesawed in the new year, following a chaotic end to 2018 — its worst annual performance since the Great Recession and worst December performance since the Great Depression. The magnitude of recent swings suggests they are driven less by economic and market conditions than by geopolitical challenges.

Why it matters: Market actors focus, sometimes myopically, on technical indicators like “moving averages” or what the Fed will do on interest rates. But the current turbulence requires factoring in critical geopolitical trends like the rise of illiberalism in Europe, Trump administration trade policies, and China’s Belt and Road initiative.

Global geopolitical tensions are already impacting trade and business.

Together, these trends are eroding faith in pillars of global governance (NATO, UN, EU, WTO, and more) and social institutions, which contributes to market volatility and unpredictability.

Meanwhile, intensified polarization in the U.S. has led to standoffs like a partial government shutdown over a border wall dispute that threaten the economy and national security.

  • The economic power of the U.S. could decline as its debt and the associated costs mount, in the absence of effective congressional leadership.

Yes, but: In the U.S., some pillars of democracy — the federal judiciary, intelligence and law enforcement communities, a reinvigorated media, and grassroots political movements — have helped counter other risks.

The bottom line: These geopolitical trends erode trust, increase market volatility and dampen investment. If the U.S. pulls out of its current malaise, particularly after the 2020 elections, more effective governance could help correct the current course. It could also serve as an example to improve stability elsewhere, especially through international cooperation.

Andrea Bonime-Blanc is the founder and CEO of GEC Risk Advisory and author of the forthcoming book “Gloom to Boom: How Leaders Transform Risk into Resilience and Value.”

Go deeper

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 7 p.m. ET: 855,007 — Total deaths: 42,032 — Total recoveries: 176,714.
  2. U.S.: Leads the world in confirmed cases. Total confirmed cases as of 7 p.m. ET: 186,265 — Total deaths: 3,810 — Total recoveries: 6,910.
  3. Business updates: Should you pay your rent or mortgage during the coronavirus pandemic? Find out if you are protected under the CARES Act.
  4. Public health updates: More than 400 long-term care facilities across the U.S. report patients with coronavirus — Older adults and people with underlying health conditions are more at risk, new data shows.
  5. Federal government latest: President Trump said the next two weeks would be "very painful" on Tuesday, with projections indicating the virus could kill 100,000–240,000 Americans. The White House and other institutions are observing several models to help prepare for when COVID-19 is expected to peak in the U.S.
  6. U.S.S. Theodore Roosevelt: Captain of nuclear aircraft carrier docked in Guam pleaded with the U.S. Navy for more resources after more than 100 members of his crew tested positive.
  7. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it.

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