Global Risk Assets Face "Unsettled" Outlook Amid Geopolitical Tensions and Market Volatility

Investor sentiment regarding risk assets has been characterized by a challenging environment recently, as encapsulated by a recent tweet from user "Evanss6" stating, "> A good analogy for owning risk assets lately." This reflection aligns with broader market analyses indicating a period of significant volatility and uncertainty across various high-risk investments through 2024 and into 2025. Geopolitical shifts and economic pressures are notably shaping this landscape, prompting caution among market participants.

The first half of 2025 saw considerable market volatility, with a sharp selloff in April due to tariff policy uncertainty and Middle East conflicts, according to J.P. Morgan's review. While developed market equities, particularly mega-cap tech stocks, rebounded to deliver positive returns, other sectors faced headwinds. Private equity markets, after two years of "murky conditions," began to emerge from the fog in 2024 with a rebound in dealmaking and distributions, as reported by McKinsey. However, fundraising for traditional commingled vehicles declined for the third consecutive year, and venture capital continued to struggle with significant drops in fundraising and deal activity.

The World Economic Forum's Global Risks Report 2025 highlights a generally pessimistic outlook, with 52% of experts anticipating an "unsettled" global environment over the next two years, and 62% expecting "stormy or turbulent times" over the next decade. Key concerns include state-based armed conflict, extreme weather events, geoeconomic confrontation, and misinformation. Although economic downturn and inflation concerns have subsided slightly compared to the previous year, the report emphasizes the interconnectedness of these global risks, which continue to influence market stability.

Despite some areas of recovery and resilience, the overall landscape for risk assets remains complex. The depreciation of the US dollar boosted international indices and emerging markets, particularly in Asia, during Q2 2025. However, the confluence of persistent geopolitical instability, evolving trade policies, and sector-specific challenges, such as those in venture capital, suggests that investors will continue to navigate a market fraught with both opportunities and considerable risks.