Papic: Markets React to Rate of Change in Geopolitical Risk, Not Absolute Levels
Marko Papic · Geopolitical Uncertainty – James Aitken, Louis-Vincent Gave, and Marko Papic (EP.440) · Apr 14, 2025 · at 1:02:28
Macro strategist Marko Papic explains how financial markets price geopolitical crises and discounting mechanisms differently than human emotional reactions.
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“One of the things that I think is very important as investors start to incorporate politics and geopolitics more and more into their toolbox is just to understand that while you as a human being really cares about absolute levels of risk, the market is not human. It's inhumane. It's a discounting mechanism. And I go back to that COVID, the market couldn't care less about hospitalizations, deaths, this, that, or the other. So when the second derivative Of geopolitical risk collapses when it becomes negative. Even if the absolute level is still very high, it's game over. You need to move on. We start to desensitize, and this is very difficult for 90% of investors to do. Once the news becomes less negative, that's all the market needs”
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