Geopolitical risks have a significant influence on movements on the stock exchange floor. Historical analyses show that the average annual return of the S&P 500 drops to around 8.3% when the threat level increases – only returning to an average of 11.7% when the threat diminishes, as shown in a new infographic from Block-Builders.de.
The stock market is particularly precarious whenever there is a great deal of uncertainty. The Geopolitical Risk Index shows that the threat is currently increasing in the face of the Ukraine conflict. Unsurprisingly, the Geopolitical Risk Index was significantly higher during the two world wars and after 11 September 2001.
There are however growing fears of an escalation, as can also be seen in analysis of Google searches. Within a very short time, the search volume for the term “war” has increased noticeably. The Google Trend Score, which indicates relative search volume, is still by no means at its highest level.
Meanwhile, 53% of Germans consider a Ukraine war “very likely” or “rather likely”. Numerous political scientists and military observers also consider further escalation conceivable; Roderich Kiesewetter (CDU foreign policy expert), for example, speaks of a real danger of invasion.
While many shares have already lost considerable ground in recent days, the Russian RTS index has been particularly hard hit, falling from 1,602 to 1,349 points in the space of a single month.