When Geopolitics Becomes an Economic Input

PIMCO

Marc Seidner, Pramol Dhawan

Research

4 Pages

PIMCO explains that geopolitics is no longer a temporary market shock but a persistent force shaping economic outcomes. Investment environments are now defined by fragmentation, where policy, trade, and security decisions increasingly drive inflation, growth, and asset performance.

Key Takeaways

Trade Fragmentation Rising: Global trade restrictions have increased more than 3x since 2019, reshaping supply chains and cost structures.
Inflation More Volatile: Supply shocks tied to geopolitics have pushed inflation variability to levels not seen since the 1970s.
Dispersion Opportunities Growing: Cross country and sector return dispersion has widened by over 30%, creating more active management opportunities.
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