Geopolitical tensions darken mood at Davos

This will be the biggest election year in history, with eight of the world’s most populous countries holding ballots

The mood at Davos wasn’t helped by Donald Trump’s overwhelming victory in the Iowa caucus. Photograph: Fabrice Coffrini/AFP via Getty
The mood at Davos wasn’t helped by Donald Trump’s overwhelming victory in the Iowa caucus. Photograph: Fabrice Coffrini/AFP via Getty

Worsening geopolitics is the biggest tail risk facing markets in 2024, according to Bank of America’s January fund manager survey, and those same concerns were evident at the World Economic Forum in Davos last week.

A forum survey shows more than 80 per cent of economists expect increased market volatility and economic uncertainty due to geopolitical tensions. A separate forum report said co-operation in peace and security had “declined since 2016 and plummeted recently”.

Meanwhile, 2024 will be the biggest election year in history, with eight of the world’s most populous countries holding elections.

In the case of Russia, March’s sham election is a foregone conclusion, but things are much more uncertain regarding November’s US election. The mood at Davos wasn’t helped by Donald Trump’s overwhelming victory in the Iowa caucus, with the former president looking increasingly likely to be the Republican candidate in 2024.

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A lot can happen between now and now and November, but Deutsche Bank’s George Saravelos reckons the US election will be one of the most consequential political events for the rest of this decade.

Little of this political risk is priced in, says Saravelos, but he expects that to change by March, when the two presidential candidates should be known. Rising political volatility may drive increased market volatility. This year could be a bumpy ride.