The greatest geopolitical risk to the capital markets is the one barely on the radar screens of investors. It is the growing gulf that divides the US and the EU.
A parting of the ways that leads to greater barriers to trade and investment between the world’s two largest economies isn’t inconceivable given the multiple tension points tearing at the fabric of the transatlantic alliance. The parties are at odds over a number of items including the Iranian nuclear deal, the Paris climate accord, Nato commitments and data privacy regulations. Add to this toxic brew the US tariffs on EU steel and aluminium shipments, and potential trade barriers in auto trade.
The current level of animosity is eroding decades-long trust and has called into question an economic partnership that has underpinned global prosperity and peace for the past 70 years.