Lazard has warned of a “bumpy ride” ahead, with ongoing conflicts and a busy global electoral cycle among the major trends front and centre for businesses and investors.
According to the firm, the top 10 geopolitical trends worth watching are:
A packed election calendar
Over 50 per cent of the world’s population, or some 76 countries, are primed to head to the polls in the coming year. The results are likely to have major implications beyond their borders, such as US-China relations with the presidential election in Taiwan; investment in India with the likely re-election of Prime Minister Narendra Modi; and notably, the potential re-election of Donald Trump as US president.
The 2024 US presidential election
According to Lazard, a closely contested election in the US between the likely candidates of Joe Biden and Donald Trump would see a hastening of policies by the current administration, such as continued export controls on China. Additionally, it anticipates allies to remain divided, with some potentially seeking to cooperate to institutionalise progress while others may be more cautious.
China’s economic challenges
A number of domestic structural forces have affected the Chinese growth story and on business confidence, such as a rapidly ageing population, slow progress on much-needed institutional reforms, and external factors such as US-led restrictions. Major implications include headwinds for sectors dependent on Chinese manufacturing and a potential escalation of competitive protectionist trade policies globally as China leans on exports for growth.
US-China relations
Starting with Taiwan’s presidential election in mid-January 2024, the strengths of US-China relations are likely to be tested in the coming year, which could see roadblocks in international business transactions and operations. Additionally, Lazard foresees greater interest in ‘friendshoring’, where the government pushes multinationals to move production from rival powers to friendly countries.
Global terrorism threat
Heightened tensions from the current fighting in Gaza could pose an increased risk of violent extremist incidents globally, particularly against Muslim and Jewish communities, according to Lazard. It also warns companies may need a renewed security emphasis in business operations.
Potential escalation in the Middle East
Concerns have been rekindled around escalated violence in the region, affecting a number of additional countries including Iran, Yemen and Lebanon. It could lead to continued volatility in oil and gas prices; uncertainty in trade flows and investments in the Middle East; and disruption of critical trade routes.
The EU’s foray into geopolitics
The growing presence of the European Union on the global stage, including vocal support for Ukraine and calls to de-risk from China, could see offsetting pressure from member states concerned with growth and competitiveness.
Spotlight on biotechnology and AI
In the coming year, governments around the world are likely to explore any risks stemming from these two tech fields on national security and the economic resilience of their supply chains. There’s looking to be more costly and complex compliance structures for companies in these fields and increased reporting of outbound investments in AI and biotech. Additionally, Lazard foresees possible incentives for research and development in these fields and supply chain reshoring.
Investing in India
India has been recognised as one of the few bright spots in an otherwise challenging global landscape, and the 2024 elections look to be a crucial test for Prime Minister Narendra Modi and his economic policies. However, state-level politics can differ from the national story due to different political parties from Modi’s BJP, resulting in uneven application of business-friendly policies and foreign inflows and complex investment opportunities in the subcontinent.
Emerging focus on Brazil and Mexico
Both countries have been benefitting from the “new normal” arising from US-China strategic competition and global economic fragmentation, Lazard said. Looking ahead, there looks to be opportunities in Brazil in fossil fuel and clean energy, while Mexico’s automotive and electronics industries, among others, are primed to be the main winners of nearshoring trends.
