It's 'the Year of Elections' – what geopolitical pressures are facing the market?

Swiss Re's group chief economist weighs in

It's 'the Year of Elections' – what geopolitical pressures are facing the market?


By Mia Wallace

With 4.2 billion people across 60 countries posed to go to the ballet box in 2024, the geopolitical pressures facing individuals, businesses, communities and societies are facing intense scrutiny. During a panel discussion at the 2024 Airmic Conference, moderator Clive Myrie led leaders from a range of industries in considering ‘the Year of Elections’ and how their results will prove consequential for years to come.

“When we’re thinking about the rest of the year, I think there is one common feeling everywhere and this is around how we grapple with the fact that the geopolitical environment we’re operating in is evolving extraordinarily quickly,” noted Claudine Fry, partner, global issues at Control Risks.

She highlighted that not only is there a sense that change is happening more quickly than it did in the past but also that assumptions are being upended and rewritten, with risk professionals now being tasked with reconsidering those assumptions. There is now much more need to think in the long-term about risk, she said, and to be very specific and intentional about how to separate out the tactical and operational implications of political unrest, violence and destabilization from the longer-term legacy of these elections.

As a consequence of how the geopolitical environment is evolving, risk managers need to be thinking about how the ‘middle powers’ are asserting themselves, Fry said, and how they are changing the way that democracies behave as well as the perception of how Western democracies should behave.

Economic pressures facing the market today

Heavily intertwined with the evolution of this geopolitical risk landscape is its impact on the world’s economies, particularly in light of the ongoing impact of high inflation.

Addressing some of the underlying issues still affecting the global economy today, Jerome Haegeli (pictured), group chief economist at Swiss Re noted that when you’re talking about risk in this context, what you’re actually talking about is uncertainty. As a reinsurance company, he said, analysing the risk horizon is what it’s all about. And risk is natural and risks have to be taken in order for progress to be made, but what can’t be dealt with is uncertainty.

At the heart of discussions about the implications of the elections – particularly the US election - there’s a single letter to bear in mind – the letter ‘R’. which stands for renaissance. That stands for the renaissance of the US economy, he said, and also the renaissance of the real economy because it’s critical to think about the fragmentation of the supply chain and how reshoring is changing the supply chain.

For example, he said, Mexico has established itself as being as important as China in the reshoring of manufacturing out of the US. However, the letter ‘R’ also represents risks that can’t be ignored. Haegeli invited the panel’s audience to cast their minds back to the post-financial crisis, pre-COVID environment and the low-risk, high-stimulus nature of the global economy in that 15-year period. That wasn’t the norm, he cautioned but an abnormal environment and it’s a positive factor that these are no longer the market conditions.

“Another ‘R’ we should be thinking about is regime shift,” he said. “Regime shift means that today, if you look ahead, inflation will remain more sticky. We expect and I expect the inflation target of around 2% to be met, not in the US. But let’s not forget that fighting inflation is a marathon, not a sprint.”

Looking at the broader environment, he noted that it’s more or less a positive story that’s being told. If you use the analogy of sailing, he said, good winds and smooth water make for strong conditions – and that’s where we are now.

“However, I would just say watch out,” he added. “The number one risk is complacency. It’s a record year of elections… and on top of that, I think we shouldn't just think about geopolitical risk, we should absolutely think about domestic political risk.”

Keep up with the latest news and events

Join our mailing list, it’s free!