Capital markets suffer as US seen as ‘significant source of geopolitical risk’

London Stock Exchange Group CEO David Schwimmer said the dollar and the country’s capital markets have been losing some of their luster around the world partly because the US is being seen as a “significant source of geopolitical risk.”

Some investors are reconsidering their overexposure to American markets and the US dollar because they’re “recognizing that it’s not always going up, up, up,” Schwimmer said at Semafor World Economy in Washington, DC.

This is causing capital to be allocated to other markets such as Asia and Europe, while some central banks are reducing their reserve exposure to the US dollar. Russian oil is being priced in other currencies, and Saudi Arabia is considering similar moves.

While the dollar won’t lose its reserve status any time soon, Schwimmer said he’s seeing some “chipping away” of the greenback as the currency of record.

The closure of the Strait of Hormuz has not yet caused any major impact on energy markets in the US, but there is already a crisis in Asia and “Europe is getting closer,” Schwimmer said. “It has created a real shudder in the marke. It’s having an impact on confidence and behavior.”

However, PNC CEO Bill Demchak argued at Semafor World Economy that while “it’s really fun to pick on the US at the moment” it’s still the most dynamic marketplace in the world.

“It’s a big mistake to discount the power of our economy and what we can do,” Demchak said.