BlackRock, the world's largest asset management company and managing $10 trillion in assets, recently warned that the geopolitical background of financial markets will further deteriorate in 2024, and the capital markets have not fully recognized these risks.
"We expect more severe differentiation between major countries in 2024, intensified competition, and reduced cooperation," BlackRock said in a report to its clients.
"However, as the stock market and other asset markets quickly emerge from geopolitical events, we are concerned that they may not be aware that we have entered a new geopolitical system. In our view, the old approach is no longer applicable."
"Geopolitical split is one of the reasons why we expect the inflation pressure will continue and the policy interest rate will remain above the level before the COVID-19 epidemic," said BlackRock.
According to the CME FedWatch tool, the bet on the Federal Reserve's rate cut in March has decreased from 75% a month ago to 40%.
BlackRock also stated, "The impact of geopolitical fragmentation on the economy and markets will depend in part on whether changes in the global order are controllable or disorderly."
BlackRock reiterated its highest rating on the tense situation in the Gulf region, stating that the risk of escalation is high.
"The disruption of Red Sea shipping through the Suez Canal indicates that the conflict may escalate to the extent of hindering supply chains and driving up production costs, specifically due to rising shipping costs," the agency said.
At the time of BlackRock's warning, the Dow Jones Industrial Average closed above 38000 points for the first time on Monday, while the S&P 500 index also set a new closing record. The market is becoming increasingly optimistic that the United States will avoid an economic recession in the short term.
Coincidentally, David Lefkowitz, Chief Investment Officer of UBS's US stock market, recently warned that the US stock market will mainly face three major risk factors this year: economic recession, rising inflation, and escalating geopolitical turmoil.