- Geopolitical Strategist
Germany (Deutschland), Institutional
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Though it sometimes feels like historic headlines are being printed every day, the recent gathering of several world leaders may one day be viewed by historians as a true turning point in 21st-century geopolitics. I’m talking, of course, about the Victory Day parade in Beijing marking the 80th anniversary of the end of World War II.
- What: Chinese leader Xi Jinping hosted the leaders of Russia, North Korea, and India in Beijing
- Why it matters: Beijing is signaling new military and diplomatic influence aimed at challenging US influence in the region and globally
- Market implications: Rising geopolitical disruption means more differentiation (a benefit for active management), and expanding opportunities for key national security investment themes
This event was a highly visible opportunity for President Xi Jinping to stand shoulder to shoulder with Russian President Vladimir Putin and North Korean leader Kim Jong Un as China unveiled powerful new military weapons ranging from advanced drones and fighter jets to hypersonic missiles and new intercontinental ballistic missiles capable of reaching the US homeland. Crucially from a geopolitical perspective, the meeting also included India’s leader Narendra Modi (though he ducked out before the military parade began).
Why does this matter?
Beijing is signaling to the world — and to Washington, DC in particular — that it now has both the military might and diplomatic sway to push back on the US and the US-led international order that has prevented great-power conflict over the past eight decades.
The timing matters. President Xi is looking to counter US President Donald Trump’s deeply divisive global trade and tariffs agenda, which has strained US relations with almost every traditional US ally around the world and, in particular, its emerging alliance with China’s top regional rival, India.
Beijing is also attempting to project an alternative to decades of US geopolitical dominance (which Xi has termed “hegemonism and power politics”), particularly across the Global South, where many countries feel threatened by US policy changes.
What an emerging “US vs them” global order means for markets
Investors should take note of this headline event. These geopolitical developments are indicative of a broader and highly consequential structural shift in the world order. This suggests a rising probability of global policy friction and, in a worst-case scenario, great-power military conflict.
This rapidly fracturing and increasingly dangerous global order will likely accelerate global policymakers’ focus on national security across the board, often at the expense of economic efficiency — potentially leading to structurally higher inflation and lower economic growth than we saw during the heyday of globalization.
These responses will likely include making defense spending and the reconstitution of domestic industrial bases even higher priorities. This dynamic will also likely lead to more protection and promotion of strategic sectors central to great-power competition, especially those — like artificial intelligence — with the potential to produce outsized geostrategic benefits.
All of this coming disruption at the regional, country, industry, company, and asset-class levels will likely create more winners and losers from an investment perspective. This could be a potential boon for actively managed strategies, including long/short approaches.
It will also likely spur new demand tailwinds for long-term investment themes focusing on national security, including legacy defense, defense innovation, as well as climate adaptation and decarbonization — many of which can be found in both private and public markets.
A key takeaway here is that paying close attention to what these rapid shifts portend in Beijing, Washington, New Delhi, Moscow, and elsewhere is a crucial piece of understanding today’s increasingly complex investment mosaic. Investors who wish to stay informed of today’s biggest risks and opportunities may do well to maintain a geopolitical view.
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