FOR PUBLIC DISTRIBUTION IN THE U.S., CANADA, LATIN AMERICA, HONGKONG, SINGAPORE AND AUSTRALIA. FOR INSTITUTIONAL, PROFESSIONAL, QUALIFIED INVESTORS AND QUALIFIED CLIENTS IN OTHER PERMITTED COUNTRIES. Geopolitical risk grabs market attention Regime drivers BlackRock Geopolitical Risk Indicator (BGRI), 2018-2022 2.5 A new world order 2 Russia 1.5 WHO declares invasionof We’ve entered into a new world China’s recent party congress was a COVID-19 a global Ukraine order. This is, in our view, the most pivotal event, both politically and e pandemic fraught global environment since economically, in our view. China Scor1 World War Two –a full break from looks set to de-emphasize economic RI the post-Cold War era. We see growth as it pursues self-sufficiency BG0.5 geopolitical cooperation and in energy, food and technology. We globalization evolving into a see slower growth compounded by 0 U.S. fragmented world with competing the effects of an aging population presidential blocs. That comes at the cost of over time. election economic efficiency. Sourcing -0.5 more locally may be costlier for Geopolitical fragmentation is likely firms, and we could also see fresh to foster a permanent risk premium -1 mismatches in supply and demand across asset classes, rather than 2018 2019 2020 2021 2022 as resources are reallocated. have only a fleeting effect on markets as in the past. Market Chart takeaway: We have seen a surge in market interest in A prime example is the response to attention is likely to stay fixated on geopolitical risk in recent months, highlighting how fraught the Russia’s invasion of Ukraine. geopolitical risks. See the chart. current environment is. Western sanctions have triggered a All this will likely contribute to the pursuit of economic self- Forward-looking estimates may not come to pass. Source: BlackRock Investment Institute. October 2022. The sufficiency. Energy security is now new regime of greater macro and BlackRock Geopolitical Risk Indicator (BGRI) tracks the relative frequency of brokerage reports (via Refinitiv) and market volatility – and persistently financial news stories (Dow Jones News) associated with specific geopolitical risks. We adjust for whether the a priority: As Europe weans itself higher inflation. sentiment in the text of articles is positive or negative, and then assign a score. This score reflects the level of market attention to each risk versus a five-year history. We use a shorter historical window for our COVID risk due to its off Russian oil and gas, we’ve seen energy shortages and higher limited age. We assign a heavier weight to brokerage reports than other media sources since we want to measure the prices. In the U.S., we see a push to market's attention to any particular risk, not the public’s. favor trading partners when sourcing the metals and materials We’re in a new world order of needed in the net-zero transition. geopolitical fragmentation, a This is the most fraught geopolitical full break with the post-Cold environment since WW II, in our view. Strategic competition between the War era.” The world is splitting up into competing U.S. and China has intensified. A tough stance toward China has Tom Donilon blocs that pursue self-reliance. bipartisan support in Washington. Chairman, BlackRock Investment Institute The U.S is trying to restrict China’s access to high-end technology. 11 2023 outlook 11 11 2022 midyear outlook BBIIIIMM1122U/M1222U/M--26121472617935--1111/16/16