It’s not inflation. It’s not interest rates. And it’s not even local economic growth. According to Besa Deda, Chief Economist at William Buck, the biggest threat to equity markets right now is growing geopolitical uncertainty — particularly from the United States — and the way it’s reshaping the global trade and fiscal landscape.

Speaking on Switzer Investing TV this week, Deda said that investors and analysts alike are having to move beyond traditional tools like technical and fundamental analysis and now factor in something broader: scenario analysis.

“They are having to focus more on scenario analysis,” she said, “because different scenarios may transpire given the high levels of uncertainty and unpredictability.”

In other words, there’s no single base case to model anymore. The risk environment is being shaped by multiple unknowns — including US tariffs, global trade fragmentation, and fiscal stress in the world’s largest economy — all of which can feed into long-term volatility in equity markets.

And it's not just escalating rivalry between the US and China we have to watch now. It's the prolonged war in Ukraine; renewed conflict in Gaza and rising tensions between Iran and Israel (just to mention a few). Retail and institutional investors alike are grappling with a world where risk is no longer confined to economic data or central bank decisions.

Markets have already shown sensitivity to these shocks. Risk-off reactions to headlines out of Eastern Europe or the Middle East have triggered sudden pullbacks, while defensive assets like gold and US Treasuries have seen renewed buying interest. For equity investors, it adds a new layer of complexity — one where even strong fundamentals may be overridden by fears of geopolitical fallout.

Deda cited comments from local Treasury Secretary Steven Kennedy, who recently addressed the Australian Business Economists Conference, noting that the old rules of global trade are being rewritten — and not in a way that necessarily favours markets.

“The trading rules and norms are changing,” Deda said. “That had already started, but it’s being accelerated since Trump’s inauguration.”

“The US no longer sees those old trading norms as in their self-interest… and that has implications for defence spending, fiscal balances, and the long end of the yield curve.”

It’s that last point that may worry investors most. Long-term US bond yields — especially 10- and 30-year Treasuries — have been rising sharply. Deda says that’s due in part to investor concern over the sustainability of the US fiscal deficit, especially following legislation to extend the 2017 Trump tax cuts.

“The bond vigilantes are back,” she warned. “That rise in long-end bond yields does have an impact — not just on borrowing costs in the US, but for other markets too.”

And while stock indices in Australia and the US are hovering near record highs, Deda cautioned that we may be entering a new phase where higher-for-longer yields become a drag on equity performance — especially if earnings falter or growth stalls.

“Markets sold off on April 2, when reciprocal tariffs were announced,” she said. “Then Trump hit pause, and markets rallied again. But it shows how fragile sentiment is.”

“I do wonder how long the share market can really hold at around these levels.”

Deda isn’t just any economist — she was formerly Chief Economist at St George Bank, giving her decades of experience in connecting macroeconomic shifts with market performance. And when someone like that says we’re entering an environment that can’t be explained by charts or historical patterns alone, it’s worth listening.

As global risks mount and traditional signals become less reliable, Deda’s advice is clear: scenario planning isn’t optional anymore. It’s the baseline for any investor serious about what’s coming next.