Use the BlackRock Geopolitical Risk Index as a substitute for year-end reviews

Investor mailboxes are being filled with year-end analysis and forecasts for 2020. These forecasts usually include some geopolitical analysis on potential risks for next year. Perhaps a simpler approach that may be more rigorous is to follow the BlackRock Geopolitical Risk Index which aggregates market attention across analyst reports, newsfeeds, and social media. The information is scored and aggregated to form an index on key risk topics. It is not the view of one analyst, but the aggregation of all opinions.

This is not a forecast of geopolitical risk, but a measure of attention. Attention can lead to market reactions; however, it can also represent the surprises that lead to large market reactions. As expected trade and US-China competition are the key current geopolitical issues. Overall geopolitical tensions are still high; however, the index has fallen from its peak, so any uncertainty risk premium may be falling. 

The index is worth watching for any investor that focuses on risk-on/risk-off  (RORO) factors. The index is especially helpful when in transition. Rising (falling) geopolitical suggest a time to move from risky to safe assets.