Politics has replaced economics as investors’ biggest fear. That’s the message from the latest survey of investors by Barclays.
As data from the bank show, geopolitics is now cited as the biggest risk to financial markets over the next 12 months, eclipsing worries over emerging market economies that topped the survey in the first quarter.
Geopolitics comes in ahead of weak China/EM growth, Fed policy withdrawal, weak DM growth, de-anchoring of inflation expectations and eurozone tensions as risk factors.
With a rebel alliance threatening to pull Iraq apart, it is arguably little surprise that geopolitics has moved to the front of the worry queue for investors.
The current low level of volatility across currency, bond and equity markets suggests investors have been scrambling to locate potential clouds on the horizon.
Indeed, the survey from Barclays shows anxiety that faster US growth will force the Federal Reserve to raise interest rates sooner than expected is no longer a major concern.
That, according to analysts at Barclays, is a potential worry in itself.
The bank comments: “This suggests that surprises on the macro front [for example, growth, inflation or monetary policy] could be more damaging than commonly perceived.”
Barclays’ survey of more than 900 of its customers between June 16 and 20 also found equities remain the asset class of choice over the next three months.