We study capital allocation and asset pricing consequences of geopolitical tensions using nearly 100 years of data. Leveraging widely adopted news-based geopolitical risk indices, we find that geopolitical threats (GPT) and acts (GPA) have markedly different implications. GPT closely tracks geopolitical risk perceptions and capital allocation decisions of investors and firms, is priced across different asset cross-sections, and predicts country-level equity premia. By contrast, GPA has weaker and less stable links to beliefs, capital allocation, and risk premia. These results are incremental to existing news-based measures of macro-financial uncertainty, including indices capturing war-related discourse and economic and trade policy risk.

US wealth inequality and long-term real interest rates exhibit a strong negative correlation over the post-war period.We quantify how much of the observed increase in wealth inequality from 1983 to 2023 can be accounted for by the decline in rates. To do so, we combine asset holdings data with asset exposures to interest rates to measure the exposure of households’ portfolios to interest rates. The portfolios of the wealthy have higher interest rate exposure due to a tilt toward equity-like assets with long duration. As a result, wealth inequality increases when rates fall. When we feed in the observed path of real interest rates, we find that this revaluation effect explains the majority of the increase in measured wealth inequality over the past forty years.

Using Capital Market Assumptions (CMA) reports, in which managers publish long-horizon forecasts and explain how they construct them, we show how they form beliefs about returns, volatilities, and correlations. They decompose return expectations into broad building blocks across asset classes, but assign different values to them. For U.S. equity, valuation change is the largest net source of disagreement. Growth expectations, however, partly offset valuation-change expectations because the two are strongly negatively correlated, so return expectations understate disagreement in the underlying views. In most non-U.S. equity markets, growth is the main source of disagreement. This matters for portfolios: equity allocations load about twice as strongly on growth expectations as on valuation-change expectations. Three mechanisms shape belief formation: managers anchor to peer consensus, use different modeling assumptions, and process information through narratives that differ in complexity and topic attention. Modeling assumptions such as mean reversion and historical calibration predict systematic forecast differences. Narrative complexity and topic attention predict responses to news: managers with more complex or valuation-focused narratives respond less to positive earnings news, whereas attention to dividend yield or downturn risks is associated with stronger responses. Comparisons with N-CSR shareholder letters show that CMA narratives reflect persistent institution-specific investment views. Volatility and correlation beliefs, by contrast, remain backward-looking.