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By Opalesque: This Bridgewater Associates Q2 CIO letter outlines three major dynamics reshaping the investment landscape: a new geopolitical paradigm, threats to US-concentrated portfolios, and technological disruption.
The rise of modern mercantilism
Bridgewater argues that interventionist governments practicing "modern mercantilism" are now a permanent fixture rather than a temporary policy phase. China has long pursued this approach offensively, building its industrial capacity and global influence. Meanwhile, developed nations have adopted defensive mercantilism in response to manufacturing decline and globalization's perceived inequities.
The Trump administration exemplifies this shift through unprecedented executive power expansion over economic policy. Trade policy explicitly targets deficit reduction, negotiations leverage US market access and military strength, and national security drives industrial policy. Traditional institutions like the WTO have been sidelined, while others face pressure to align with these objectives.
The implementation strategy involves aggressive initial pushes followed by tactical retreats when outcomes become intolerable, then renewed attempts with better information. This cycle created significant market volatility, exemplified by "Liberation Day" - an extreme policy push that triggered US equity selloffs, rising yields, and dollar weakness before the administration pulled back.
Despite these retreats, ...................... To view our full article Click here
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