The recent Pahalgam terror attack in Kashmir and the developments that followed between India and Pakistan thrust the two nuclear-armed neighbors into global headlines. For seasoned geopolitical observers, the sequence of events was both familiar and instructive. Rhetoric escalated. Limited cross-border skirmishes ensued. Markets reacted – but then resettled.
This essay is not a rehash of battlefield maneuvers or diplomatic posturing. Instead, it seeks to cut through the noise and offer a clear reflection on what this latest flare-up means for investors — and what it doesn’t.
Market Resilience: A Signal Worth Noticing
First, let’s confront the obvious: there was no material damage to investment sentiment in either India or Pakistan stemming from the violence. The Indian stock market has continued to climb. The Nifty 50 is up about 6% since early April, boosted by an influx of foreign investment that reached $5.5 billion in May, the highest monthly total in nearly a year.
Defense stocks rallied. The Nifty India Defense index gained over 12%, adding about ₹1.17 lakh crore in market capitalization. In a more fragile environment, such headlines might have triggered capital flight. Instead, they spurred tactical sectoral bets.
Pakistan’s KSE-100 index initially fell around 14% in the two weeks after the Pahalgam attack. But after a ceasefire was announced, the market rebounded over 9%. What we are witnessing is not the unraveling of economies, but their insulation from geopolitical flashpoints.
Tit-for-Tat, Not Total War
Why the market calm? Because investors understand the playbook by now.
India and Pakistan have fought four wars and experienced countless skirmishes. But both sides are, at present, too constrained to let symbolic retaliation spiral into sustained military engagement. India, focused on maintaining global investor confidence, projects resolve without provoking large-scale retaliation. Pakistan, facing a deteriorating economy and deep IMF entanglements, is in no position to escalate.
This was a bounded confrontation. And markets treated it as such.
The Dog That Didn’t Bark: China
In recent years, China has deepened its strategic relationship with Pakistan, including through the Belt and Road Initiative and arms deals. But absent from this episode was significant deterioration in India-China ties.
Just months ago, India and China agreed to disengage from their most recent standoff along the Ladakh border. That progress appears to be holding. Beijing, intent on avoiding another South Asian standoff that distracts from its domestic challenges, stayed muted.
For investors concerned that a Pakistan-India skirmish might trigger broader instability involving China, this absence of escalation is a key data point. It suggests that India-China relations, while strained, have reached a balance neither side wants to disrupt.
Tension with Washington: A More Subtle Risk
If there is one area of long-term significance, it lies not in Islamabad or Beijing, but Washington.
While the Pahalgam attack took place, Vice President Vance was visiting New Delhi, a moment meant to symbolize the deepening U.S.-India relationship. But then President Trump, in characteristic fashion, veered off-script. He suggested moral equivalency between India and Pakistan and claimed to have used the threat of tariffs to coerce both sides into de-escalating.
To New Delhi, this was a diplomatic insult. India sees itself as a rising power, not a misbehaving state to be disciplined with economic threats. That these remarks came as the two countries were inching toward a free trade agreement makes them more damaging.
According to U.S. Commerce Secretary Howard Lutnick, a trade deal between India and the U.S. will materialize in the “not too distant future.” It remains to be seen whether that is wishful thinking or whether both India and the U.S. are looking past this diplomatic faux pas.
More likely, this episode will reinforce India’s instinct to avoid overdependence on Washington, regardless of who is in the White House and its overall pursuit of strategic autonomy.
Silver Linings and Upside Risks
Ironically, this conflict may hold the seeds of long-term optimism.
There is always the possibility that India and Pakistan, after repeated skirmishes, may recognize the futility of constant hostility and seek limited rapprochement. It’s a stretch. But history is full of rivals who became partners once their cost-benefit calculus changed.
Even without that, renewed focus on defense and infrastructure spending could boost economic activity. Capital expenditure, when well-directed, can drive growth. In India, rising defense allocations may support domestic manufacturing, job creation, and technological development.
Don’t Overindex on the Headlines
It’s tempting to let geopolitical drama shape our view of markets.In this instance, that would be a mistake.
India and Pakistan’s investment profiles should be assessed based on macroeconomic trends: oil prices, global protectionism, food security, climate risks, and domestic politics. These are the forces that drive long-term returns.
Yes, these are nuclear-armed states with volatile histories. But they’ve shown a consistent ability to contain conflict. That pattern holds.
Final Thoughts: A Diverging Future
We remain optimistic about India. Quantity has a quality of its own. Despite structural challenges—infrastructure gaps, political volatility, and environmental risks—India presents one of the most compelling macro stories among emerging markets. A youthful population, growing consumer class, and confident global posture all point to continued strength.
Still, India’s political evolution under a more state-interventionist, Hindu nationalist government presents real risks. For wealthy Indian families and global investors, tax policy, capital controls, and property rights deserve close attention. Shielding wealth from populist pressure is increasingly urgent.
Pakistan’s outlook is less encouraging. Calling it a “basket case” may sound harsh, but the label fits. Chronic instability, a collapsing currency, and institutional weakness make it difficult to take Pakistan seriously as an investment destination. There is potential, yes. But realizing it requires deep, systemic change.
So while the world watched the latest India-Pakistan flashpoint with bated breath, markets shrugged. Investors, rightly, are learning to separate signal from noise. And the signal is clear: South Asia’s future will be shaped less by border tensions and more by fiscal policy, institutional reform, and the slow grind of economic development.
If you’re interested in learning more about Bespoke’s approach to private wealth management and how we can help you build a secure financial future, we invite you to reach out to us directly. We’d be happy to set up a confidential consultation at your convenience.
Thank you for considering Bespoke as your partner in wealth management. We look forward to the opportunity to work with you.
This information is intended for general educational purposes only and should not be construed as legal or investment advice.
Since the end of the Cold War, investment decisions, particularly in the West, have been built on the implicit assumption of U.S. primacy, regulatory predictability, and globalization’s inexorable march. But this order is unravelling. The world is sliding into a multipolar system where economic and political power is more diffusely distributed across regions and regimes.
The implications are profound. From China’s techno-industrial ascent to Europe’s strategic reawakening, the challenge is no longer simply assessing economic fundamentals. It integrates a structural understanding of political power, cultural fragmentation, and strategic competition into every investment thesis.
Geopolitics is at the core of these changes, and as such is reshaping global capital flows, portfolio strategy, and institutional decision-making. Inflation, protectionism, currency debasement, monetary policy, even war – geopolitics touches all these risks, and more. Building and maintaining a geopolitical analytical framework is no longer peripheral to making decisions – it is essential.
Institutional Awakening or Window Dressing?
According to a report by UBS, 62% of family offices now cite geopolitical conflict as their primary long-term fear. Institutions are responding to this fear, with banks like Citi, Goldman Sachs, Lazard, and BCG having all debuted formal geopolitical advisory capabilities in recent years.
Developing geopolitical expertise, however, is not as simple as announcing a center staffed with well-known names from the policy or defense world. The perceived unimportance of geopolitics for the last 30 years means there has been a shortage of practitioners with the requisite level of experience to create, maintain, and challenge geopolitical models. Without sophisticated analytical models, it is impossible to connect dots across borders, disciplines, and asset classes.
Until geopolitics becomes a cross-cutting discipline rather than a decorative appendage, many financial firms will continue to misprice risk and miss opportunity. True strategic thinking requires a systemic lens – one that integrates macro forces, historical context, and local dynamics into financial decisions.
As the global order transforms, so does the path of capital. After a 25+ year bull run in U.S. assets – marked by deep liquidity, strong returns, and relative stability – smart capital is now scanning for alternatives not only to hedge against volatility, but to capture long-term growth.
Mexico stands out. Despite political tensions, its manufacturing base is poised to benefit disproportionately from U.S.- China decoupling. Europe, long criticized for its slow growth and strategic inertia, is now channeling public funds into industrial revitalization. And even China – despite mounting geopolitical friction – presents compelling opportunities in selected sectors, especially where valuations are depressed relative to long-term potential.
These are all structural reallocations premised on a world where value is no longer concentrated in one hegemonic system.
Repricing Risk in a Fractured World
Investors must now confront questions that would have seemed too academic a decade ago: Can India or Brazil serve as new nodes of stability, or will they become arenas for great power competition? Are certain markets mispricing political risk because they continue to rely on outdated assumptions of global governance?
In this environment, asset classes that were once considered “safe” – like U.S. Treasuries or global index funds – may no longer offer the diversification or protection they promise. Meanwhile, thematic investments in supply chain localization, energy transition, and national tech ecosystems are gaining new salience.
Here, too, geopolitics drives opportunity. Increased international competition necessarily means governments will support initiatives to be at the forefront of technological innovation. Doomsday geopolitical prophets routinely declare World War III is nigh – sometimes in the South China Sea, sometimes in the Middle East, sometimes in Europe – the place changes but the hysteria remains.
The real conflict is happening on the frontlines of semiconductor manufacturing, biotech advances, and the first true energy transition since oil displaced coal in the early 20th century. Think of the competition over vaccines and personal protective equipment during COVID, or the EV competition between Tesla and BYD, or the semiconductor restrictions that have failed to constrain China, or China’s prominence in global mineral supply chains – this is where geopolitics is reshaping the world on a daily and inexorable basis.
Distinguishing Signal from Noise
Geopolitical forecasting is not about predicting black swans. True black swans, by definition, cannot be predicted. What matters instead is constructing robust frameworks to distinguish durable trends – like multipolarity or the erosion of institutional consensus – from sensationalist headlines.
This is where most financial firms falter. Mired in reactive models, overexposed to media cycles, confident (complacent?) in the passive and index-dominated status quo, they lack the analytical muscle to challenge their own assumptions and the flexibility to do things differently.
As Mike Tyson famously once said, everyone has a plan until they get punched in the mouth. Geopolitics is the right hook. Geopolitics affects everything and everyone. There is no avoiding its impact. The competitive edge that geopolitical analysis offers is not prescience of the future but preparedness for change. Done well, geopolitical analysis ensures one is never surprised or paralyzed at the prospect of change, and at a time of volatility spiraling, this kind of situational awareness is priceless.
If you’re interested in learning more about Bespoke’s approach to private wealth management and how we can help you build a secure financial future, we invite you to reach out to us directly. We’d be happy to set up a confidential consultation at your convenience.
Thank you for considering Bespoke as your partner in wealth management. We look forward to the opportunity to work with you.
This information is intended for general educational purposes only and should not be construed as legal or investment advice.
Authored by Jacob Shapiro, Head of Geopolitical & Macro Research and Senior Client Relationship Manager at Bespoke Group
I know how worried the average person is about market volatility and geopolitical issues when random people in my life ask me some version of, “So what do you think is going to happen?” This morning, I was at my daughter’s school, where I thrilled her class with a riveting reading of The Serious Goose. Afterwards, I helped her build a castle made of blocks whilst wearing a tiara — as one does. While we were building, a teacher started asking me about my opinions on President Trump’s tariff policy and the impact it was having on retirement accounts.
The average person’s worried index is extremely high.
Is the Trump Administration Bluffing?
Open a news website, turn on television news, or — if you are truly brave — hop on social media, and you are greeted with doom and gloom: comparisons of recent market performance to the pandemic, the 2008 Great Financial Crisis, and even the Great Depression. These comparisons are not unreasonable, especially those to the Great Depression, which was likely made worse and longer by the 1930 Smoot-Hawley Tariff Act. If the Trump administration doubles down on its global trade war, the current market drawdown may appear in retrospect to be the early innings of a much longer game.
Which is why I continue to think the Trump administration is bluffing. The comparison is a legitimate one. The Trump administration does not want people like you to think that — it wants the world to take its tariff threats with deadly seriousness. When Kevin Hassett, the Director of the National Economic Council, posted on social media that President Trump was considering a 90-day tariff pause, the White House wasted no time shouting down the assertion as “fake news.” (Hassett has since deleted the post.) But if President Trump doubles down, what awaits him is an economic depression, a bloodbath in the midterms, and an ignominious place in U.S. history books.
At a certain point, it does not matter whether President Trump is bluffing or not. The haphazard, lazy, and mercurial (I use these descriptors objectively, not pejoratively) way the Trump administration’s tariff policy has been rolled out has already cast the dice: Any country that can lessen its dependence on the United States will do so — whether Trump walks back the tariffs or not.
Not all countries can do so. Mexico is celebrating that it wasn’t included on “Liberation Day” because the country remains, as Porfirio Díaz once said, “So far from God, so close to the United States.” Canada still has some reckoning to do. Japan has already reached out to the U.S. and agreed to cabinet-level tariff negotiations. But other countries — like China and Brazil, or the European states that make up the EU — will not take this medicine. They will self-amputate and enroll in physical therapy.
Key Data Points to Consider
Amidst the chaos, there are a few key data points to keep in mind:
From Reuters: “The European Union wants India to eliminate tariffs on car imports under a long-pending trade deal, and Prime Minister Narendra Modi’s government is willing to sweeten its current proposal to seal the talks… ‘The EU has come back asking for a better deal, and India wants to make a better offer,’ said one of the industry sources.” The EU is not turning back. It is embracing a multipolar world and pivoting quickly to establish better trading relations with potential markets.
Also from Reuters: “Several powerful Iranian-backed militia groups in Iraq are prepared to disarm for the first time to avert the threat of an escalating conflict with the U.S. Trump administration.” This comes on the heels of President Trump agreeing in principle to indirect talks with Iran in Oman over its nuclear program. President Trump likely wants to make a deal with Iran rather than start a war in the Persian Gulf.
China has taken off the gloves — retaliating with 34 percent reciprocal tariffs, potentially dumping U.S. Treasuries, devaluing its currency, front-loading fiscal stimulus, and exhorting its people to “focus on doing your own thing.” But according to one commentator writing in The People’s Daily: “The sky will not fall,” and more importantly, China “did not close the door to negotiations with the U.S.” China had four years to prepare for a Trump presidency. It is ready for even higher tariffs than what have been announced… but it is also ready to make a deal with the Trump administration when the White House is ready.
Market Movements and What Lies Ahead
As I type this in the early afternoon of April 7th, the S&P 500 and the Nasdaq are back in positive territory. Bitcoin has pared its losses and is approaching $80,000. The yield on the 10-year Treasury is rising and closing in on 4.2 percent. The dollar is also climbing from its Liberation Day nadir. What happens next depends on the whims of a single man in the White House. If he doubles down on tariffs, the bottom could fall out. If something like the 90-day negotiation reprieve happens, a whipsaw is possible — or even renewed market confidence. My horoscope says it is crucial that I stand up and be a deciding force. It has as much predictive value as anything else in this paragraph.
Geopolitical methodology rejects thinking in such short time periods. I have no insights into what President Donald Trump is feeling or thinking about doing next. I have no one-size-fits-all strategy for my daughter’s teacher or for whoever is reading this. The short term promises to be volatile, unpredictable, and messy — and just how messy depends entirely on the decisions of a single person, which means there is an impossibly huge degree of variance in what is going to happen next.
The Long-Term Outlook
The long term, however, is clear — indeed, becoming clearer by the day. The U.S. will abdicate its role as leader and protector of a globalizing world. Supply chains, trading relationships, and alliances will be upended and remade. The U.S. will remain a powerful, wealthy, and influential country in the world… but global companies that profited from globalization will suffer, and the status of the U.S. dollar and U.S. Treasuries as safe havens will erode. It will be a time of national champions, of vertical integration, of technological and military competition, of scrambles for resources, markets, and advantage.
In other words, it will look a lot like the world usually looks when there isn’t a global hegemon — which has only happened twice in all history: the British Empire in the 19th century and the U.S. between 1990 and 2025. It is a reversion to the geopolitical mean. One can be forgiven for a sense of whiplash — the human mind is not hardwired to accept change easily, and multiple generations have grown accustomed to the present. But the geopolitics that is unfolding for all to see is not the aberration.
That was the last 35 years.
If you’re interested in learning more about Bespoke’s approach to private wealth management and how we can help you build a secure financial future, we invite you to reach out to us directly. We’d be happy to set up a confidential consultation at your convenience.
This information is intended for general educational purposes only and should not be construed as legal or investment advice.
