Boxed in

We are entering the third act of 2025, and we’ve already seen Trump’s Alaska summit with Putin, NATO’s Hague summit, the G7 in Canada, Israel’s strikes on Iran, oil spike and then slide, stagflation fears, tariff tremors, AI stocks rallying like it’s 1999, and private credit ballooning.
Despite these interesting times, markets continue their onward march. The S&P 500 is flirting with all-time highs and BlackRock’s Rick Rieder, managing a humongous $2.4 trillion in fixed income assets, called 2025 the “most bullish investing environment ever”. To back up that claim, he pointed to record buybacks, $7 trillion in cash still sitting on the sidelines, and 81% of S&P 500 companies beating earnings expectations.
Leader limits
We might be on the verge of a geopolitical meltdown, but it seems global stock markets didn’t get the memo. That’s because markets trade on constraints, not headlines. As Marko Papic argued in Geopolitical Alpha (2020), national leaders exercising their national interests may make the news, but constraints box them into a narrow corridor of outcomes.

Understand those constraints and you can see past the sabre-rattling and glimpse where markets could be heading. Papic’s ‘constraint mapping’ method identifies demographic trajectories, fiscal ceilings, and resource bottlenecks as the real guardrails on global markets.
Constraints are not the same as preferences. China’s President Xi may desire technological supremacy, Trump may prefer tariff-driven reshoring. But demographics, fiscal math, and trade balances dictate the reality.
And investor behaviour itself can accelerate or expose these limits. George Soros’s reflexivity theory flips the efficient-market script: instead of prices always reflecting fundamentals, he argued that perceptions and actions feed back into fundamentals. In a reflexive cycle, optimism can inflate valuations, which then reinforces optimism, until the feedback collides with a constraint such as deficits, failed government bond auctions, or supply bottlenecks.
Narratives and numbers
Investor sentiment suggests markets intuitively get constraints. Confidence is high – more than two-thirds say they’re optimistic – but it’s not blind exuberance. During the March selloff, only 8% of investors sold. Most held or even added.
When you map the constraints, markets start to look less irrational. In the face of newsy noise, corporate earnings remain strong, liquidity hasn’t dried up, and central banks are cutting and being pressured to cut faster. We are in “a new age of geoeconomics” where economics itself has become the battlefield and tariffs, sanctions, subsidies the new arsenal. Despite the froth, constraints hem policymakers into a narrow range of actions. And that predictability is what keeps capital steady.
After Trump’s Alaska summit, Russian equities briefly rallied on hints of a thaw in US-Russia relations. But sanctions, oil dependence, and a war-drained budget quickly capped whatever fumes of optimism markets were huffing. Constraints harshed the buzz and pulled prices back down. Similarly, Bank of America noted that “Alaskan oil pricing was already baked in” before the recent Trump-Putin summit was even over. Traders pointed to the tight supply, stretched pipelines, and steady demand.
The same lesson was on display during Trump’s Liberation Day tariff bonanza. Headlines opined on the death of globalisation, and markets flinched. For a few days. But zoom out on a 20-year S&P 500 chart, and Liberation Day looks like a blip, barely visible against the broader trend. Resilient corporate earnings, sticky consumer demand, and limited alternatives to US assets muted any simmering panic.
Uncle Sam’s ceiling
Constraints bind governments too. Politicians in Washington can dream up gazillion-dollar AI strategies, but with deficits already above $2 trillion and Treasury auctions facing tepid demand, fiscal policy is hemmed in. PGIM’s 2025 poll found 52% of institutional investors rank geopolitics as their top risk, yet a third are increasing their risk allocations anyway. They know governments can’t escape borrowing limits.
The strain is magnified by the slow erosion of dollar hegemony. Foreign demand for Treasuries is no longer the boon it once was, as the BRICS explore non-dollar commodity settlement and Gulf exporters diversify reserves. The dollar is still king, but that incremental shift raises borrowing costs at the margin.
BlackRock’s geopolitical risk dashboard (BGRI) is showing elevated tension readings even as news chatter has faded. Markets are still hyperaware of the bubbling risks of US–China strategic competition, global trade protectionism, and the lingering Israel-Iran flashpoint.
For investors, the BGRI isn’t a doom meter but a volatility signal. If the indicator is elevated while equities grind higher, it means investors are discounting chatter and anchoring on constraints. Elevated tension points to potential short-term swings, but history shows such spikes rarely derail long-term performance.
Edge lords
Leaders make the noise with summits, speeches, sanctions, and promises, but portfolios are buffeted by immovable limits like debt, demographics, supply chains, and liquidity. Big stones like Trump and Putin and Xi make ripples, but the river still runs in the channel carved long before.
States boxed in by constraints weaponise economics instead of armies. This is the essence of today’s “strategic interdependence” which sees states redirecting supply chains and capital flows not for efficiency, but for resilience and leverage. 2025 has been defined so far by constraints, arguably more so than the so-called “TACO” trade (“Trump always chickens out”).
In the US–China trade scrap, globalisation has shifted from cost to resilience. China’s share of US imports dropped from 22% in 2017 to just 13.4% in 2024. Foreign direct investment into China collapsed more than 90% in 2023. Vietnam and Mexico are now rising as critical nodes in the rerouted supply chain.
Resource nationalism, tariffs, and capital controls are inefficient. But they also represent geoeconomic weaponisation, with states using economics as a proxy for hard power. States aren’t really free agents. They’re arbitraging around chokepoints.
Fiscal space tightens and private credit swells to fill the gap. Trade ties fray and supply chains bend toward whoever’s lucky enough to sit outside the line of fire. Central banks run out of road and investors consider gold, the oldest hedge in finance.
Ultimately, while preferences may shift overnight, constraints shape messy intentions into more predictable behaviour. For investors, the edge isn’t found in headlines, but in mapping the limits.
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Stocks and shares ISA
Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more
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General investment account
Stocks and shares ISA
Personal pension (SIPP)
Commission-free investing in 6,500+ UK, US, and European stocks, ETFs, and more
FX fee of 0.39% on non-GBP trades
5% AER on up to £3k uninvested cash
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