Investing in uncertainty: inflation, shocks, and geopolitical risk

This research project addresses a central question for contemporary investors: how to build resilient portfolios in a world marked by growing uncertainty. In recent years, persistent inflation, sudden financial market shocks, and escalating geopolitical tensions have significantly reshaped investment management practices. These risks not only affect market volatility but also undermine investors’ ability to preserve and grow their capital over time. The study integrates theoretical frameworks and empirical analysis to investigate how inflation, market jumps, and geopolitical risk influence asset allocation decisions and portfolio performance. The findings reveal that exposure to these sources of uncertainty can substantially alter expected returns and risk profiles, highlighting the need to rethink traditional investment strategies. In particular, the empirical evidence shows that inflation and geopolitical tensions do not operate in isolation; rather, they tend to reinforce each other, amplifying their negative effects on portfolios. During periods of heightened geopolitical instability accompanied by inflationary pressures, investment performance becomes especially vulnerable. Ultimately, the study proposes an integrated perspective on managing macro-financial and geopolitical uncertainty, emphasizing the importance of adopting dynamic allocation strategies capable of balancing return and protection in highly unstable environments.