Investors thrust into rules of the 'jungle': Economist

Geopolitical risks are increasingly encroaching on traditional market cycles, forcing investors to make sense of these "jungle times" where anything goes, according to an economist.

Diana Mousina, deputy chief economist at AMP, said the current economic cycle is unlike any other she's experienced where "things are completely up in the air and seem very tribal."

She told the annual Stockbrokers and Investment Advisers Association (SIAA) Conference that it is a difficult time for investors who are trying to digest the tumult triggered by the geopolitics of the day.

"For us, we're trying to distil what is noise here and what is signal. We know that geopolitics is becoming more of a factor in markets," she said, pointing to defence and warfare as some key drivers. Then there is the case of the US government.

"Unfortunately, I don't think that the tribal times are going away anywhere. This is going to be a factor, whether Trump's in power, whether someone else in the US is in power," she said.

"This is a natural change in our world as a result of the global economy moving from a new polar to a multipolar world - that we have more of these areas where we can have trouble around the world.

"This is a problem because for investors it means more volatile markets, particularly in equities."

However, a "geopolitical risk premium" in the markets is filtering through.

"Despite all this clear evidence that policy uncertainty is moving up, we have seen complete resilience in markets over 2026 - to everything that's been happening in the Middle East, but also to the general fear that the economic cycle is not as straightforward as perhaps where it once was," Mousina said.

The S&P 500, for example, is up nearly 8% year-to-date after falling about 8% at the start of the US-Israel war in the Middle East.

The US market is outperforming relative to its peers, Europe is struggling, while China is faring well, she said.

In essence, Mousina reasons the fundamental economic backdrop around the world is driving resilience. Another reason why markets are overlooking global tensions is companies continuing to generate profits.

"The latest profit season in the US was incredibly strong. Earnings growth across the board was up more than 20% year on year before the profit season started," she said.

"Most analysts were looking for profit growth about 10% or so. If you look at the tech sector, profit growth there is more like 40% over the past year, so it is the tech story that's booming, but broader than that as well."

Australia, though, is an outlier compared to its peers.

Over the next 12 months, Mousina predicts the Reserve Bank of Australia will raise the base rate twice. At the May meeting, interest rates rose by 25bps to 4.35%.

"That is going to put a handbrake on the economy. We think that growth here is going to soften to about 1% to 1.5% in terms of GDP growth. That's low for Australia. That will mean that our population is running above our level of economic growth, which means that per person we're going backwards again. That is disappointing after we had this resurgence in growth last year, but maybe it's what's needed to get inflation down," she said.

Financial Standard is the official media partner of the 2026 SIAA Conference.