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Navigating Geoeconomic Risk in the U.S. Stock Market

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Abstract

Geoeconomic risk—the risk that firms incur valuation losses when countries deploy economic, trade, or financial leverage for geopolitical aims—has become a first-order concern for investors. In this post, based on our recent Staff Report, we document that domestic U.S. stocks expose investors to substantial geoeconomic risk through firms’ global supply-chain relationships, affecting investors’ returns and portfolio allocation. We also find that investors are compensated for bearing geoeconomic risk through higher risk premia.

Suggested Citation

  • Matteo Crosignani & Lina Han & Marco Macchiavelli, 2026. "Navigating Geoeconomic Risk in the U.S. Stock Market," Liberty Street Economics 20261001, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:103863
    DOI: 10.59576/lse.20261001
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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