Political turbulence is no longer the exception; it is the rule. That, at least, is the sobering conclusion from a year-long study of global political sentiment released by Permutable, a data intelligence firm specialising in market sentiment analysis.
Permutable’s Political Tension Sentiment Index, which harnesses natural language processing to gauge sentiment across thousands of media headlines in near real time, paints a picture of a world gripped by persistent geopolitical unease.
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Unlike traditional indicators that may lag unfolding events, the Index functions as a real-time barometer of political tension. Over the past 12 months, it has tracked a sustained undercurrent of negativity in global sentiment, driven not by isolated shocks but by an embedded volatility that shows little sign of easing. This has significant implications for markets, policymakers, traders and financial institutions trying to navigate an increasingly reactive landscape.
Trade tensions remain disruptive
The data reveals that political sentiment has swung continuously between episodes of concern and brief, unsustained optimism. Trade tensions have been the principal source of disruption. Notably, the Index recorded steep declines during the US–Canada tariff dispute in February 2025 and again following President Trump’s renewed protectionist rhetoric in April.
Although subsequent diplomatic overtures, such as the announcement of a US–UK trade agreement in May, led to temporary sentiment improvements, they proved short-lived. The broader geopolitical outlook remains fragile, suggesting that headline-driven relief rallies may offer little more than momentary respite.
The Trump and Elon Show
Leadership dynamics also emerged as critical sentiment drivers. Events such as Trump’s inauguration in January prompted a measurable spike in political tension, as did the subsequent fallout with Elon Musk in June. The market’s sensitivity to the actions and pronouncements of high-profile individuals underscores the role of personality politics in fuelling investor anxiety. It is a world where reputational ruptures or diplomatic missteps can shift sentiment within hours.
Permutable’s findings suggest that political risk has evolved from an episodic concern to a systemic condition. For investors, this presents a dilemma.
Traditional models of geopolitical forecasting, which are based on discrete risks and foreseeable diplomatic patterns, appear increasingly inadequate in a climate defined by flux. Portfolio managers and traders, particularly those exposed to global equities or commodities, must now contend with an environment in which sentiment, often shaped by rhetoric rather than policy, can swiftly alter capital flows.
What can traders expect next?
The outlook for the second half of 2025 remains fraught. Permutable expects political volatility to persist, as unresolved trade disputes collide with a string of upcoming national elections and ongoing scrutiny of global leadership.
In such an environment, sensitivity to sentiment-driven headlines is likely to remain elevated. This could affect a wide array of asset classes, from energy markets to sovereign debt, particularly in regions where political legitimacy is being questioned or where institutional strength is under strain.
The Political Tension Index, which is currently sadly only available to professional investors and traders, offers investors a quantitative lens through which to view this turmoil. By transforming fragmented media coverage into structured data, the Index provides an early warning system for potential market disruption. It also functions as a valuable input for stress testing and macroeconomic modelling, allowing institutions to factor political instability into scenario planning.
For those navigating the global economy’s increasingly jagged contours, this type of alternative data may soon become indispensable. We would love to see it being made available to smaller traders soon.
