When Geopolitics Moves Markets, Most Portfolios Aren’t Ready
There is a particular kind of market risk that doesn’t show up cleanly in a spreadsheet. It doesn’t follow earnings seasons or central bank calendars. It arrives through a headline, a border dispute, a sanctions announcement – and by the time most investors have processed it, the repricing has already begun.
Geopolitical risk is not new. But the current environment has a different character to it. What we are seeing is not a series of isolated shocks, but an accumulation of structural pressures: fractured supply chains, sustained conflict, and policy unpredictability operating simultaneously across multiple geographies. That combination has a way of staying in markets longer, and running deeper, than a single event.
The question for investors is not whether this will eventually resolve. It’s whether their portfolios are positioned to navigate the period before it does.
What Markets Are Actually Signalling
In periods of genuine geopolitical stress, the signal tends to show up in commodities and currencies before it surfaces in equities. Energy markets become a key transmission mechanism: oil price volatility doesn’t just reflect supply anxiety, it flows directly into inflation expectations, corporate cost structures, and consumer sentiment.
We have seen exactly this dynamic play out. Supply disruptions have kept energy markets volatile and directional. Currency markets have repriced on shifting capital flows and policy divergence. These are not peripheral markets – they sit at the centre of how geopolitical stress propagates through the real economy.
Systematic trend following is well-suited to precisely this environment. Not because it predicts geopolitical outcomes (it doesn’t) but because it is built to detect and follow the price trends that geopolitical stress tends to produce. When energy trends, it captures energy. When currencies move on safe-haven flows, it captures that too. The strategy doesn’t need to know why a trend is happening. It needs to know that it is.
The Diversification Assumption Worth Re-examining
Most portfolios carry an implicit assumption: that diversification across asset classes will provide protection when conditions deteriorate. In stable regimes, this assumption generally holds. In stress regimes, it often doesn’t.
When a single macro force – geopolitical risk, an energy shock, a sudden policy reversal – moves through markets simultaneously, assets that appeared uncorrelated begin moving together. The diversification that looked sound on paper compresses exactly when it needs to expand.
This is not a flaw to be corrected with more asset classes. It is a feature of how modern markets behave under stress, and it requires a different solution: exposure to return streams that are structurally independent of traditional beta, rather than just spread more widely across it.
“True diversification isn’t about just holding more assets,” says Simone Haslinger, CEO of East Coast Capital Management. “It’s about holding assets that behave differently when conditions become difficult. That’s a higher bar — and it’s the bar that matters.”
A Framework Built for Uncertainty, Not Despite It
At ECCM, we are often asked how trend following performs in “normal” markets. The reality is that trend following is designed for the full range of market conditions, but it tends to earn its keep most visibly in environments like the current one.
Geopolitical stress produces the extended, directional moves across commodities, currencies, and rates that trend following is built to capture. Elevated volatility, far from being a headwind, is the raw material the strategy works with. And because our approach is rules-based, it doesn’t require us to take a view on how a conflict resolves, which policy will be enacted, or how long uncertainty will persist. The price action tells us what we need to know.
This matters in practice. When uncertainty is high, discretionary decision-making is most prone to error: anchoring to prior regimes, hesitating at inflection points, or seeking safety in familiar assets regardless of what the trends are telling them. A systematic process removes that vulnerability.
In the video below, “Integrating Trend Following Into A Portfolio”, ECCM’s Founder and CIO Adam Havryliv and Strategy Ambassador Richard Brennan explore how trend following can complement an investor’s portfolio, often hedging against uncertain market environments.
Conclusion
Geopolitical uncertainty is not a phase to be endured while waiting for markets to normalise. For investors with the right framework in place, it is a productive environment – one that generates the kind of clear, sustained trends that systematic strategies are built to capture.
At ECCM, our ECCM Systematic Trend Fund is designed to do exactly that: to respond to what markets are doing, wherever the opportunity arises, and to deliver return streams that remain genuinely uncorrelated to traditional portfolios through periods of stress and stability alike.
Wholesale clients can find more information on ECCM and the ECCM Systematic Trend Fund at www.eccm.com.au.