Head of Macro Analysis
Summary: In today's 'Macro Chartmania', we focus on the Geopolitical Risk Index (GPR) - a geopolitical risk benchmark which gets back to 1899.
Download this week's full edition of Macro Chartmania composed of more than 100 charts to track the latest macroeconomic and market developments.
The Geopolitical Risk Index is based on the work of D. Caldara and M. Iacoviello (“Measuring Geopolitical Risk”, working paper, Board of Governors of the Federal Reserve Board, 2017). The methodology is rather simple as it counts the occurrence of words related to geopolitical tensions in leading international newspapers. As far as I know, this is the only geopolitical risk benchmark that gives a historical perspective since it gets back to 1899.
The GPR spikes around the two world wars, at the beginning of the Korean War (1950-53), during the Cuban Missile Crisis (1962), after 9/11 and now after the Ukraine invasion by Russia. It now stands at a two-decade high at 281 – close to the levels reached after 9/11 (the peak was at 303). This is the fourth highest level on record. The GPR is updated on a monthly basis. Given the evolution of the crisis in Eastern Europe, the April print is likely to keep moving higher, in our view. Contrary to the VIX, the correlation between the GRP and most financial instruments or assets (e.g. gold for instance) is poor. This is however an interesting indicator. This time, it does not only reflect the rise in geopolitical risk but also a profound paradigm shift in security policies for Europe and the rest of the world following the invasion of Ukraine.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Uncover the shifting focus in 2024's FX markets towards growth resilience and relativity, away from bond yields and inflation stories.
Embrace the metal revolution on the commodity market in the coming year, with a focus on gold, silver, platinum, copper, and aluminum.
The gloominess of geopolitical conflicts and the repetitive nature of political agendas. What else does 2024 hold in store for us?
The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.
Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Uncover the shifting focus in 2024's FX markets towards growth resilience and relativity, away from bond yields and inflation stories.
Embrace the metal revolution on the commodity market in the coming year, with a focus on gold, silver, platinum, copper, and aluminum.
The gloominess of geopolitical conflicts and the repetitive nature of political agendas. What else does 2024 hold in store for us?
The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.
Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.
