BlackRock Warns Markets Not Appreciating Worsening Geopolitical Backdrop

By James Glynn

SYDNEY--The world's largest investment manager BlackRock has warned of further deterioration in the geopolitical backdrop for financial markets in 2024, adding that asset markets aren't fully appreciating the risks.

"We expect deeper fragmentation, heightened competition and less cooperation between major nations in 2024," BlackRock said in a note to clients.

"Yet as broad stocks and other assets move on quickly from geopolitical events, we worry they may not be appreciating that we have entered a new geopolitical regime. The old playbook no longer applies, in our view," it added.

The warning comes as the Dow industrials finished Monday above 38000 for the first time, while the S&P 500 also clinched another record close.

"Geopolitical fragmentation's economic and market impact will depend, in part, on if changes to the global order are managed or disorderly," BlackRock said.

BlackRock's assets under management climbed to $10 trillion in the fourth quarter, beating analyst expectations.

The investment group reaffirmed its highest-level Gulf tensions rating saying the risk of escalation is high.

"The disruption of Red Sea shipping aiming to pass through the Suez Canal shows how the conflict can expand to hamper supply chains and drive up production costs, in this case via rising shipping costs," it added.

BlackRock is also keeping its U.S.-China strategic competition risk rating at a high level.

"Taiwan remains a significant flashpoint, as the recent election shows. We think intense, structural competition between the U.S. and China is the new normal, especially in defense and technology," the investment firm added.

Write to James Glynn at [e-mail]

(END) Dow Jones Newswires

January 22, 2024 19:05 ET (00:05 GMT)

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