Location
Please select your investor type by clicking on a box:
Terms & conditions
We are unable to market if your country is not listed.
You may only access the public pages of our website.
Markets with Mike: Stop being shocked by shocks
Key takeaways:
- What’s changed? Structural forces are leading to more frequent political and economic shocks.
- The causes: Several fault lines are leading to frequent shocks – from globalisation and automation to inequality and climate change.
- Investment implications: Flexible absolute return strategies and active management of relative equity and duration positions within traditional balanced portfolios can potentially help buffer portfolios. This approach offers the potential for strong risk-adjusted returns, while aiming to provide some protection against both fixed income and equity market volatility.
Brexit, Trump, Tariffs 1.0, Russia’s invasion of Ukraine, the Truss UK gilt crisis, food price spikes, Trump (again), Liberation Day, the software sell off and now Iran and yet more political upheaval in the UK.
Over the past decade, we've witnessed shock after shock – events that markets treated as anomalies but that are part of a pattern. Rather than a bevy of black swans, these shocks represent something more structural.
The fault lines reshaping our world
Several fault lines are driving repeated political, economic, and environmental shocks, and they're unlikely to go away.
Domestic
- Globalisation and immigration
- Innovation and automation
- Inequality and house prices
- Debt and demographics
International
- Forever war and freeloading fatigue
- Nationalism and national security
Environmental
- Climate change
The US has lost close to 5 million manufacturing jobs since 2000
Source: Bureau of Labor Statistics, Macrobond, March 2026
In our full paper, available here, we highlight how these drivers have led to an era of successive shocks and why we shouldn’t be surprised if the kind of political, economic and climate related shocks we’ve seen over the last decade keep on happening.
How should investors respond?
So far, of the shocks we discuss, only the 2022 shock linked to the Russian invasion of Ukraine has had a meaningful impact on a balanced, internationally diversified, portfolio of stocks and bonds. Even Covid provided only a very brief shock to diversified portfolios.
But just because most earthquakes are mere tremors doesn’t mean they all are.
The investment implications include:
- Absolute return strategies offer the potential to buffer portfolios when stocks and bonds fall together.
- While high quality duration will likely continue to diversify against some shocks, active management of duration within traditional portfolios could help investors during the times when duration doesn’t diversify portfolios.
Just as the Japanese now build their buildings to flex to withstand frequent earthquakes, investors should build their portfolios to incorporate the flexibility needed to withstand regular shocks.
Read more about Mike: An introduction to Mike Bell, RBC BlueBay’s Head of Market