Geopolitical rivalries, particularly trade tensions between the US and China, have overtaken inflation as the primary worry for sovereign wealth funds and central banks managing $22 trillion in assets, according to an Invesco survey. The conflict, from Ukraine to trade barriers, has intensified, with inflation concerns waning. “Geopolitics has trumped inflation on both short-term and long-term outlooks,” said Rod Ringrow, Invesco’s head of official institutions.
Eighty-three percent of respondents cited geopolitical tensions as their top immediate concern, surpassing inflation’s 73%. Climate change emerged as the second-biggest long-term risk. The survey, part of the Invesco Global Sovereign Asset Management Study, polled 83 funds and 53 central banks in Q1 2024. The West’s seizure of over $300 billion in Russian assets further fueled concerns, with 56% of central banks viewing the “weaponisation” of reserves as boosting gold’s appeal.
Emerging markets, especially India, are seen as increasingly attractive, with many funds anticipating these markets to outperform developed ones.