investment viewpoints

What assets are vulnerable to geopolitical risk in 2024?

What assets are vulnerable to geopolitical risk in 2024?
Florian Ielpo, PhD - Head of Macro, Multi asset

Florian Ielpo, PhD

Head of Macro, Multi asset

In 2024, voters will be called to the polls in over 60 countries, including the US, where the election is already making headlines. This year is likely to test even the most solid democracies, with an expected rise in so-called ‘populist’ parties and candidates. These parties and candidates have several campaign themes in common, one of which is of particular interest to us: fear of globalisation. In this weekly edition of Simply put, we attempt to determine the impact of geopolitical risk on markets. 


Need to know:

  • The theme of regionalisation, which is commonly targeted by populist parties, could exacerbate geopolitical risk in 2024
  • Asset prices are said to be resilient to the ups and downs of geopolitical risk – but the same cannot be said for volatility
  • A potential increase in geopolitical risk could intensify the volatility of commodities in particular. This is a market that we will keep a close eye on in 2024


Geopolitical risk is already high

The ‘goodbye free trade, hello regionalisation ’ trend is all the rage, but could it, above all, continue to fuel the increase in geopolitical risk, in line with the difficult years of 2022 and 2023? If voters say yes to parties promoting more regionalisation, what consequences will this have for investors? Which asset classes are vulnerable to this risk, which is not usually priced into financial assets?

There are several ways of measuring geopolitical risk, ranging from market data such as currency volatility, to more fundamental data such as country scores established by major supra-governmental bodies, or analyses of newsflow. Economists Dario Caldara and Matteo Iacoviello proposed one measure based on analysing press reports in "Measuring Geopolitical Risk". Their index measures the frequency of press articles dealing with geopolitical episodes generating international tensions, breaking them down into geopolitical threats and geopolitical events.

Figure 1 shows the latest developments in this measure, and the study of its peaks only reinforces its relevance. It clearly shows the three shocks that have occurred since 1986: the fall of the Berlin Wall, 9/11 and, more recently, the conflicts of 2022 and 2023. So today, geopolitical risk has increased, even before this year of high stakes elections has really gotten underway. If geopolitical risk persists in 2024, what impact can we expect on portfolios?


FIG 1. Global geopolitical risk index

Source: "Measuring Geopolitical Risk”Past performance is not a guarantee of future results. For illustrative purposes only.


Risk influences risk

To answer the previous question, we need to link geopolitical risk to a market metric that is not easy to determine. As we often read in the most quantitative macro analyses, it is difficult to draw a line between geopolitical risk and market performance. It is probably a question of rethinking the transmission channel linking this risk and asset prices. If geopolitics is a risk factor, it is probably because it tends to influence market risk (as measured by volatility) more than market prices. If there is a link between geopolitical risk and market risk, this can be seen in the correlation between risk premium volatility and the previous measure of global geopolitical risk.

Figure 2 shows these correlations by sub-period. The asset class with the greatest sensitivity in terms of volatility to geopolitical risk is commodities. Period by period, bonds and equities seem to have been fluctuating with only a loose link to geopolitical risk, which is not the case for commodities, where volatility rises much more steadily when geopolitics are at play. This says nothing about their trend, but it may spur diversification-minded investors to keep an eye on the increase in commodity volatility in 2024. This is perhaps where we can best monitor the market’s response to the ups and downs of forthcoming election campaigns.


FIG 2. Correlation between the volatility of major risk premia and geopolitical risk

Source: Bloomberg, LOIM.


Simply put, any rise in geopolitical risk is likely to fuel volatility in commodity markets.

Nowcasting corner

The most recent evolution of our proprietary nowcasting indicators for global growth, global inflation surprises, and global monetary policy surprises are designed to track the recent progression of macroeconomic factors driving the markets.

Our nowcasting indicators currently show:



  • Growth is still trending up from low levels, and is unchanged globally this week 
  • Inflation pressures remain ‘low but rising’ – and this is only starting to become evident in the eurozone
  • Monetary policy remains in dovish mode globally, with the notable exception of the eurozone –- for now

World growth nowcaster: long-term (left) and recent evolution (right)

World inflation nowcaster: long-term (left) and recent evolution (right)

World monetary policy nowcaster: long-term (left) and recent evolution (right)


Reading note: LOIM’s nowcasting indicator gather economic indicators in a point-in-time manner in order to measure the likelihood of a given macro risk – growth, inflation surprises and monetary policy surprises. The nowcaster varies between 0% (low growth, low inflation surprises and dovish monetary policy) and 100% (the high growth, high inflation surprises and hawkish monetary policy).

important information.

For professional investors only

This document is issued by Lombard Odier Asset Management (Europe) Limited, authorised and regulated by the Financial Conduct Authority (the “FCA”), and entered on the FCA register with registration number 515393. This document is approved at the date of publication.

Lombard Odier Investment Managers (“LOIM”) is a trade name.

This document is provided for information purposes only and does not constitute an offer or a recommendation to purchase or sell any security or service. It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful. This material does not contain personalized recommendations or advice and is not intended to substitute any professional advice on investment in financial products. Before entering into any transaction, an investor should consider carefully the suitability of a transaction to his/her particular circumstances and, where necessary, obtain independent professional advice in respect of risks, as well as any legal, regulatory, credit, tax, and accounting consequences. This document is the property of LOIM and is addressed to its recipient exclusively for their personal use. It may not be reproduced (in whole or in part), transmitted, modified, or used for any other purpose without the prior written permission of LOIM. This material contains the opinions of LOIM, as at the date of issue.

UK regulation for the protection of retail clients in the UK and the compensation available under the UK Financial Services Compensation scheme does not apply in respect of any investment or services provided by an overseas person. A summary of investor rights and information on the integration of sustainability risks are available at:

Neither this document nor any copy thereof may be sent, taken into, or distributed in the United States of America, any of its territories or possessions or areas subject to its jurisdiction, or to or for the benefit of a United States Person. For this purpose, the term "United States Person" shall mean any citizen, national or resident of the United States of America, partnership organized or existing in any state, territory or possession of the United States of America, a corporation organized under the laws of the United States or of any state, territory or possession thereof, or any estate or trust that is subject to United States Federal income tax regardless of the source of its income.

Source of the figures: Unless otherwise stated, figures are prepared by LOIM.

Although certain information has been obtained from public sources believed to be reliable, without independent verification, we cannot guarantee its accuracy or the completeness of all information available from public sources.

Views and opinions expressed are for informational purposes only and do not constitute a recommendation by LOIM to buy, sell or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change. They should not be construed as investment advice.

No part of this material may be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorised agent of the recipient, without Lombard Odier Asset Management (Europe) Limited prior consent. In the United Kingdom, this material is a marketing material and has been approved by Lombard Odier Asset Management (Europe) Limited which is authorized and regulated by the FCA. ©2024 Lombard Odier IM. All rights reserved.