Research

Rising policy and political risk: implications for asset allocation

Using a multi-time horizon framework in an era of secular regime change

By: Dirk Hofschire Lisa Emsbo-Mattingly
Updated: 6/3/2021
Key Takeaways
  • We believe the longstanding global regime of relatively stable and investment-friendly policies, politics, and regulation is nearing an end.
  • Rising populism, geopolitical de-stabilization, and deglobalization pressures are driving the change.
  • We expect greater government intervention in the economy to threaten familiar investment-related structures such as relatively undistorted market signals and rules-based global commerce.
  • To separate headline noise from longer-lasting trends, we have enhanced our multi-time horizon framework to better inform asset allocation decision making.
  • From the standpoint of strategic asset allocation, we believe higher political risk argues for increased portfolio diversification—including greater geographic diversity and exposure to inflation-resistant assets—to help guard against a wider array of potential outcomes.
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