POLITICS has toppled global markets from record peaks and over a turbulent few weeks stepped to the fore as investors confront the prospect of an increasingly fractious Europe, isolationist United States and a slowdown in the pulse of world trade.
Geopolitics topped the risk list of sovereign money managers this year and, after a roaring rally, money is rushing out of potential flashpoints, such as Taiwan's stock market, and into havens such as gold, which hit an all-time high last week.
The line of thinking is that a period of peace and free trade is finished and the next one looks less profitable.
Nearly half the globe votes this year and results so far underpin the shift in mood: Taiwan elected a president detested in Beijing, voters lurched to the right in France and installed the largest left-wing majority in Britain for a generation.
Over just eight days, the US campaign trail created shock waves: frontrunner Donald Trump was grazed by a bullet and Joe Biden quit with less than four months to go until polling day.
Markets are tuning in and the news has pulled geopolitical concerns to the front of investors' minds.
"It is definitely one of the more important considerations we have been working into our process all year," said Erik Knutzen, multi-asset chief investment officer at Neuberger Berman, which manages US$481 billion in assets.
"The high-level way that that is being manifested is by assessing our overall portfolio risk levels.
"An environment of elevated geopolitical risk would lead you to turn that risk dial down."
That has been evident in prices as markets immediately focus on two potential pitfalls likely to be heightened by a Trump victory: inflation and restrictions or disruptions to semiconductor sales, particularly for Taiwan.
Gold, considered an inflation hedge and a beneficiary of demand from central banks in a climate of mistrust, shot to a record high above US$2,450 an ounce in the days after the attempt on Trump's life, an event that has galvanised his supporters.
"All of Trump's policies are likely to be inflationary, be it tax cuts, immigration or reshoring, and hence, dollar bearish. So the dollar is likely to depreciate against gold," said Alpha Alternative chief executive officer Prashant Kothaari.
At the same time, more than US$100 billion has been wiped out from the market value of Taiwan Semiconductor Manufacturing Co. in less than a week after Trump sounded equivocal about his commitment to Taiwan's protection and chip industry.
Goldman Sachs' cross-strait risk indicator, which analyses news, is below peaks, but has rebounded over the past week.
Taiwan's currency slumped to its lowest in more than eight years on Monday as investors fled the island which is at the forefront of chipmaking technology and the front line of US-China tension.
"The return of this geopolitical risk has effectively blunted enthusiasm for the AI hardware trade," said Union Bancaire Privée chief strategist Norman Villamin.
As money managers have become more certain of US rate cuts in September and of a Republican White House, geopolitical concerns are seeping in to longer-term thinking about the globe's economic potential and risks building in the background.
High interest rates are starting to bite and China's growth is slowing. There are wars in the Middle East and the fringe of Europe where major powers are lined up on opposite sides.
"We see tensions remaining high and stemming policy consequences that will likely last the decade," said David Bianco, Americas chief investment officer at DWS.
For now, US equities volatility, measured by the VIX index, is rising, but low by historical standards and, as of early last week, there have been no dramatic flows into so called "tail-risk funds" designed to profit in a downturn.
"Geopolitics is never the main focus of financial markets, which particularly for the equity market is always on interest rates and earnings growth," said Matt Sherwood, head of multi- asset investment strategy at Perpetual in Sydney.
But geopolitics is one of those issues that if it is triggered can be a large left tail event, he said.
"For 30 years, investors have benefited from the greatest era of globalisation and geopolitical stability the world has seen," said Michael Rosen, chief investment officer of Angeles Investments in Santa Monica. "A new, riskier era has begun."
The writers are from Reuters