- Geopolitical Strategist
United States, Institutional
Change
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Key points
- US-China great power competition, conflicts worldwide, and a fragmented global order characterize the structural geopolitical outlook for 2026
- Prioritization of national security brings about investment opportunities to consider, including among AI and emerging technologies
- As a result, differentiation at the regional, country, industry, and company levels, as well as across asset classes, is likely — a dynamic that lends itself to active management
Geopolitical risk will once again be a key variable to monitor across the global investment landscape in 2026. At the same time, the historic structural changes now sweeping through national security and policy environments around the world will offer investment opportunities along the way — if you know where to look.
Structural outlook: A far cry from Goldilocks
The combined stresses of US-China great-power competition, a rapidly fragmenting global order, and the longer-term impacts of climate change paint a negative structural geopolitical picture for 2026. Add to this the unprecedented number of serious military conflicts around the world — in Ukraine, the Middle East, Venezuela, and in several parts of Asia, to name a few examples — and we’re very likely to see a larger focus on national security, writ large. These geopolitical tensions will drive several key trends:
- Increased defense spending globally
- A deepening national security focus, especially related to AI and other emerging technologies
- More protection and promotion of the key inputs necessary to “win” great-power competition, such as critical minerals, biotech, and semiconductors
- Continued use of tariffs and other economic tools in a geostrategic context
Simply put, 2026 will be a long way from Goldilocks, and prudent investors should respond accordingly.
Practically speaking, this means positioning for structurally higher inflation, lower growth, and more differentiated macro and market outcomes relative to the heyday of globalization. It also means getting more exposure to the key long-term investment themes emerging amid this accelerating policy shift toward more intense national security priorities.
Navigating geopolitical tension: Where to watch and how to react
Because geopolitical risks with a wide range of potential outcomes will abound in 2026, scenario planning and a flexible investment approach may be beneficial.
Developments to watch throughout the year include:
US-Venezuela
- On January 3, the US initiated an operation to remove Venezuelan president Nicolás Maduro from power. At this time, we do not anticipate major risk-off market disruptions or wider regional conflict spread.
- These actions strengthen my conviction that the Trump administration is increasingly focused on great-power competition in the Western Hemisphere. The US will likely seek to exert more influence in the Western Hemisphere to counter Chinese and Russian actions in Venezuela and across the region.
- Watch: The potential for wider disruption remains a key variable to monitor. This includes the possibility of mass refugee flows from Venezuela and heightened political conflict if the internal situation deteriorates in the near term.
US-China relations
- The bilateral relationship between Washington and Beijing remains the most important indicator of geopolitical tensions to gauge in 2026 and for years to come.
- There may be increased stability prior to the anticipated summit between Chinese President Xi Jinping and US President Donald Trump in April, which is likely to produce a tentative trade arrangement influenced by the United States' strength in advanced semiconductors and China's significant role in the supply of critical minerals and rare earth elements.
- Long-term strategic decoupling is highly likely to continue amid growing great-power competition, especially in emerging technologies and defense.
- Watch: The US diplomatic position in the APAC region in 2026, and whether President Trump applies a more “transactional” approach regarding US security policy in the region.
Ukraine-Russia
- Expect some de-escalation in the conflict in 2026, as both sides look toward a negotiated settlement given their respective resource constraints.
- Any potential ceasefire is likely to be hard-fought and unstable.
- Bottom line: Expect Ukraine to maintain its sovereignty (while surrendering some territorial integrity), while NATO countries across Europe remain incentivized to accelerate rearmament plans amid Russian aggression and reduced confidence in the US security umbrella.
Iran-Israel
- There is a high probability of more Israel-Iran military conflict given the “existential threat” Tehran’s nuclear program represents to Israel.
- Conflict would produce minimal market impacts unless it spreads regionally or materially affects oil production.
- Watch: Whether Israel and the US pursue a regime-change strategy in Iran.
Domestic politics globally
- Domestic politics are likely to play an outsized role in foreign policy throughout 2026, adding more uncertainty and volatility to the global geopolitical outlook.
- Watch: US midterm elections in November; elections in Russia, Israel, Brazil, and Hungary; EU governments grappling with rising populism, political fragmentation, immigration, and social strains associated with new priorities around defense spending.
Investment opportunities in a shifting geopolitical landscape
Geopolitical cycles are long — historically, they last between 80 and 100 years. Structural changes like those we’re witnessing now only come around once per century and tend to be disruptive. So, while market risk is structurally higher in this new regime, 2026 will afford ongoing and novel opportunities to seek portfolio winners and losers.
Because this shift toward national security is likely to last for several years — if not longer — 2026 may be an attractive time to find more exposure to a variety of long-term investment themes across both public and private markets, including:
- Defense and defense technology innovation (for example, AI, space, and aerospace)
- Critical minerals and rare earth elements
- Biotech
- Cyber defense
- Renewable energy and climate resilience strategies
This is true at the regional, country, industry, and company levels, and across asset classes. In my view, this environment is naturally conducive to active management, which can seek to avoid increased market risks and capitalize on differentiation more nimbly than a passive approach. Notably, there may be alpha opportunities for long/short and other alternatives strategies. In any case, I believe prudent investors may do well to incorporate a geopolitical perspective into their portfolio strategy in 2026 and beyond.
Hear more on geopolitics and investing
Geopolitical Strategist Thomas Mucha discusses the connections between macro, market, and geopolitical forces on our WellSaid podcast. Listen to his recent conversation with Commodities Portfolio Manager David Chang.
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