In a year marred by inflation risks, trade wars, and economic divergence, Yardeni Research says the most “spectacular and reliable bull market” in 2025 hasn’t come from equities or AI—but from geopolitical chaos.
From South Asia to the Red Sea, markets have been increasingly hostage to global flashpoints, with investors rotating into safe-haven assets amid spiraling conflict.
India-Pakistan Clash: From Standoff to Strike
The unthinkable became reality as India launched missile strikes inside Pakistan, escalating tensions over the contested Kashmir region. Yardeni notes the moment was “something no one had on their geopolitical bingo card.”
Market Reaction: Global risk assets sold off on the news, while gold and defense stocks rallied, and the VIX surged.
Social Signals: “When ‘#IndiaPakistanWar’ trends on social media,” Yardeni wrote, “you know the markets are about to face a shockwave.”
China: Tariffs, Protests, and a PBOC Rate Cut
Even as U.S.-China trade talks resume, pressure is building inside China:
Protests Emerge: In a rare public outcry, factory workers in southern provinces are demanding back pay due to U.S.-driven export declines.
Goldman Estimate: Up to 20 million jobs in China are tied to U.S. shipments, making tariffs a systemic risk.
PBOC Moves: The People’s Bank of China cut rates, signaling deep concern over slowing growth and labor instability.
Track China’s macroeconomic data—like trade balance, inflation, and industrial output—with the Macroeconomic Indicators API to monitor how tariffs and unrest are impacting fundamentals.
Trump’s Trade Gambit: Isolation Over Negotiation
President Trump doubled down on protectionism, declaring that the U.S. “doesn’t need to sign any” trade deals, even as trade-fueled inflation pressures rise.
Exception: A deal with Ukraine, framed by Yardeni as “an offer President Zelensky couldn’t refuse,” grants the U.S. preferential access to critical resources.
No Security Guarantee: The pact offers no NATO-like protection, leaving the Russia-Ukraine conflict to “wreak havoc on European energy and grain markets.”
Safe Havens Surge
In this geopolitical bull market, safe havens are in demand:
Gold: Spiked to multi-year highs as investors brace for prolonged instability.
Defense & Cybersecurity Stocks: Surge as governments ramp up military and digital infrastructure.
Treasuries: See intermittent strength as volatility pushes investors toward lower-risk assets—despite inflation worries.
Investment Implications
Geopolitical Hedging is Now Strategic: Allocations to gold, defense, and emerging market volatility hedges are no longer tactical—they’re core.
Track Economic Spillovers in Real Time: APIs tied to macro data, such as FMP’s macroeconomic indicators, are critical in fast-moving markets.
Expect Risk Premiums to Stay Elevated: With nuclear tensions, stalled diplomacy, and fragile supply chains, geopolitical risk is now structurally embedded in valuations.
As Yardeni concludes, “This may be the first bull market where fear, not greed, drives momentum.”
