Financial markets have been largely unmoved by developments in Afghanistan, but the chaotic U.S. exit from the country is heightening underlying geopolitical risks, and, according to some analysts, potentially clouding the outlook for President Joe Biden’s legislative agenda.
“When it comes to markets, there continues to be basically no day-to-day relationship between U.S. geopolitical risks and equity markets” as a result of the situation in Afghanistan, said Mark Y. Rosenberg, chief executive officer of GeoQuant, a research firm that analyzes geopolitical risk.
But the outside risk of a terrorist attack or other major geopolitical incident has risen, according to GeoQuant’s data-based metrics.
“It does make the ever present fat-tail risk of a major terrorist attack on the U.S. fatter,” Rosenberg said, in a phone interview.
Put simply, tail risk refers to the prospect of an event that’s unlikely but…