Deciphering strategic investment opportunities in a complex new world order

Some of the opportunities in the new regime are likely to be driven by the effects of deglobalization and the actions of governments in response to shifting geopolitics. Some of the knock-on investment implications of these X factors may be related to increased reshoring and friend-shoring of manufacturing, and technological innovation related to the energy transition.

• A boost to investment spending in many developed and some emerging markets: Historically depressed rates of capital expenditures, public investment, and productivity may receive a lift from shifting structural trends, such as reshoring, rising cost of capital, and clean energy. The countries, industries, and companies that are at the center of these rising investment trends may provide the best asset-market opportunities.
• Historically high global equity correlations giving way to lower correlations, creating greater opportunities to diversify portfolios according to geography: Geopolitics and climate risks (climate related technological transformation) could contribute to even more differentiation across the outlooks for productivity and profits around the world.
• Many emerging and frontier markets are located far from the systemic geopolitical fault lines and are endowed with key resources. Countries that can create a favorable environment for domestic and foreign investments may provide an attractive backdrop for investing opportunities.
• Despite the end of its unipolar global dominance, the United States is well positioned. It possesses a rich base of financial, corporate, institutional, and natural resources to adapt to shifting secular trends.
• Europe’s economic position may be improving. Overall, the bloc seems to be headed toward greater economic, fiscal, and political cohesion, and it is increasingly prioritizing new investments in climate and energy security.
• Thematic portfolios. Regime shifts in inflation, interest rates, globalization, and climate may increasingly be areas to exploit, based on their ties (or lack thereof) to increased productivity.