The rapid pace of changes coming out of the White House and global headline risk is weighing on investors and markets. However, risk indices like the Global Political Risk Index (GPR) and the Bank of England’s Systemic Risk Survey remain stable. Cindy Beaulieu, North American CIO at Conning, a $170 billion insurance manager, recently told Institutional Investor that it would probably take military intervention for the indices to spike.
Beaulieu described the current environment as “very uncertain, somewhat chaotic, and pretty disruptive,” with tariffs and geopolitical tensions “giving investors pause about where this will take us.”
As if to emphasize her point, Beaulieu made these comments to II on February 28, shortly before President Trump and Vice President J.D. Vance’s disastrous meeting with Ukrainian President Volodymyr Zelensky.
And yet the Global Political Risk index has held relatively steady. When Russia invaded Ukraine, it spiked to 431, the highest it’s been since hitting nearly 931 shortly after 9/11. It has since gone down to around 126 as of March.
“We’re seeing more muted reactions from these risk indices than we used to,” Beaulieu said. Investors have relied on governments and monetary policymakers to step in front of geopolitical conflicts, and until that changes, markets have looked past these events — until now.
So far, the U.S.’ indirect involvement in overseas conflicts in the form of defense funds, military aid, or sanctions has suppressed these risk indexes, reducing both the duration and severity of market responses. “We’ve had swift responses from governments and central banks,” she said. “When someone’s going to swoop in to save the day, it eliminates some of that volatility.”
Beaulieu noted that she “would expect the index to rise again and for markets to react more significantly” if the U.S. had “to get involved militarily” in a global conflict.
“If we have to put troops on the ground and deploy aircraft and start dropping bombs ourselves, that changes the landscape,” she added. “We haven’t been in that situation for a while.”
While Conning’s insurance clients don’t get caught up in the daily headlines, Beaulieu said she’s still “getting a lot of questions about the long-term.” Insurers have identified geopolitical events among their top concerns, so they’re asking Conning if the U.S. is entering a more protectionist global environment, if they can expect to see more trade and labor challenges (especially if the U.S. overhauls its immigration policy). “That will eventually impact the macro environment and markets,” she said.
Beaulieu highlights that geopolitical risk extends beyond traditional concerns like wars and conflicts to include emerging challenges such as artificial intelligence and climate change. AI in particular has become a global arms race, with regions competing to develop advanced technologies as quickly as possible.
“We’re in an arms race on the AI front,” she said, emphasizing that this competition represents a significant and immediate challenge. She argues that AI must be included in any comprehensive assessment of geopolitical risk, even though many traditional surveys and analyses have yet to fully incorporate it.
Climate change also falls under the broader umbrella of geopolitical risk. Beaulieu points to examples such as droughts that have triggered food insecurity, which in turn has led to social upheaval and unrest in various regions. These climate-related disruptions, while often viewed as environmental issues, have profound geopolitical implications.
Beaulieu noted that not all of these changes are necessarily negative. She suggested that there are things that need to change in Washington, so some of this presents “welcomed opportunities.” Still, the Conning CIO expects 2025 to continue being a “volatile year.”
