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This is the second part of my ongoing series on the geopolitical, foreign policy, and market consequences of the US presidential election, which focuses on a Biden 2.0. (Please also see Trump 2.0: National security and investment themes.)
In contrast to my Trump 2.0 note, the implications of a second Biden administration can largely be boiled down to four words: “more of the same.” In sum, this means a continued US industrial and foreign policy focus on “protection and promotion” of key strategic sectors, a deepening focus on coordinating these actions with allies across Europe and the Indo-Pacific, and an acceleration of coordinated national security actions through institutionalized channels (NATO, the QUAD, AUKUS, US-Japan-Republic of Korea alliance, etc.).
While the geopolitical environment is likely to remain destabilized regardless of November’s result — particularly regarding China, Russia, Iran, and North Korea — a second Biden term would offer a somewhat clearer and more predictable policy roadmap for us to follow. In sum, a higher policy priority on national security, writ large, favors thematic exposures to long-term “great-power competition” trends, as well as a more disrupted and therefore more differentiated environment for us to find “winners and losers” across regional, country, asset class, and company levels. This constructive “active management strategy” backdrop is particularly suited to a variety of alternatives and private equity strategies as well.
Caveats:
Impacts on current (and future) conflicts:
In contrast to a robust “trade-first” approach in a Trump 2.0 that would likely employ additional tariffs and other trade measures on adversaries and some allies alike, a Biden 2.0 will likely remain more “strategic,” long term, and multilateral in nature in trade, as well as with industrial and national security policies.
This extends to climate policy, which remains one of the most critical factors for assessing future geopolitical instability, particularly across equatorial and tropical zones where the majority of conflicts are located; so, again, expect “more of the same” and, likely, an acceleration of climate-related actions given the national security imperatives.
Here’s how I view the big three geopolitical hotspots if we get a Biden 2.0:
This destabilized geopolitical backdrop, and especially the long-term policy approach that we’re likely to see in a Biden 2.0, should translate into ongoing opportunities across the national security space, writ large. These interlocking and increasingly dangerous geopolitical events mean that policymakers globally will continue to favor national security, often at the expense of economic efficiency.
Once again, the investments in the “great-power competition” theme should continue to outperform in a Biden 2.0, particularly if the administration deepens its focus on core security themes, including defense, defense innovation, climate adaptation, and decarbonization priorities.
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