A changing world order:
beyond the headlines

Moving away from Pax Americana

For much of the post-World War II era, the global system operated under what’s often called Pax Americana. The US was the dominant economic, military and political power, underwriting global security, open trade and multilateral institutions. Historically, periods of broad economic openness have coincided with dominance by a single hegemon.

That era is now fading. Clear indicators – from share of global trade and foreign investment to influence in international institutions – show US dominance in decline, while China’s economic and industrial power has surged. What’s emerging is a return to great-power competition in a multipolar world, which is more reminiscent of the 19th century than the post-war period investors have grown accustomed to.

Trump: forceful messenger

The Trump administration’s ‘America First’ agenda is often cast as political theatre – but it taps into deep-seated economic and strategic anxieties within the US electorate.

China’s rise as the world’s manufacturing powerhouse has brought cheaper goods worldwide, but at a cost: hollowed-out US industries, fragile supply chains, widening trade deficits and rising inequality. Many Americans now view the global system as one that the US is over-generous in sustaining, but that no longer serves its interests as well as it once did.

Crucially, concern over China is now bipartisan in Washington. There’s growing consensus that markets alone can’t ensure national resilience. Political intervention through trade policy, tech controls and supply chain reshoring is increasingly seen as justified, even at the cost of economic efficiency. Trump didn’t create this shift – he has simply been its most forceful messenger.

The rise of geoeconomics

One of the most important changes investors need to understand is the rise of geoeconomics – the use of economic policy to achieve foreign policy goals, and vice versa.

Trade, finance, technology and energy policy are no longer treated as neutral, positive-sum tools. They are increasingly used as weapons of statecraft – from the threat or imposition of tariffs and pressure on allies to increase defence spending, to withdrawal from multilateral agreements and the selective use of sanctions.

The US dollar’s central role in global finance gives Washington unique leverage. Tools like financial sanctions and US Federal Reserve swap lines have become instruments of strategic influence. At the same time, the US is pushing back against what it sees as allied free-riding, seeking a repricing of its role in upholding global order.

This doesn’t mean the US is becoming isolationist. Rather, it is becoming more transactional, demanding clearer economic or strategic returns from its partnerships.

Energy and resources

Energy and natural resources are central to the new era of strategic competition. Historically, access to cheap, reliable energy has been a foundation of both industrial strength and geopolitical influence.

Recent US actions point to a shift away from passive energy self-sufficiency towards active control of key markets, particularly in oil and gas. The Trump administration has been explicit that its intervention in Venezuela was motivated by access to energy resources and investment opportunities in the oil sector.

Seen in this context, US pressure in the Western Hemisphere, rhetoric around Greenland and assertiveness in the Middle East are not isolated moves or random escalation. They reflect a broader strategy of regional dominance.

De-globalisation and instability?

A common fear is that this transition will lead to outright de-globalisation and sustained market instability. History suggests a more nuanced outcome.

Great-power rivalry tends to be episodic rather than constantly explosive, with long stretches of tense normality. Trade becomes political, but it doesn’t disappear. Instead, it is re-routed, with supply chains adjusted for national security concerns rather than dismantled entirely.

Importantly, today’s world is far more financially integrated than during the Cold War. This makes a full US-China decoupling unlikely. A partial rebalancing of supply chains in sensitive sectors is a more realistic scenario.

What markets are telling us

Despite the dramatic headlines, financial markets have remained remarkably resilient. Equity markets have absorbed geopolitical shocks without broad sell-offs.

Markets appear to judge that these developments don’t significantly threaten corporate profit prospects or the medium-term inflation outlook. A strong earnings environment, productivity gains from AI and a shift towards lower interest rates have all helped underpin market stability.

At the same time, geopolitical tensions are likely to drive fiscal support, particularly in defence, infrastructure and supply-chain resilience. These areas can provide durable tailwinds for select sectors.

Portfolio implications

For investors, the key takeaway is that the global investment environment has changed in structural ways, even if markets don’t overreact to every geopolitical flashpoint.

In a more fragmented and competitive world, diversification becomes more critical. Exposure to structural growth themes, especially AI and productivity-enhancing technologies, remains essential. Companies with resilient business models, strong balance sheets and pricing power are best placed to navigate geopolitical uncertainty.

The US-China rivalry won’t be settled over a single cycle. It will likely unfold over decades, marked by tense coexistence and selective economic separation rather than the emergence of a definitive winner.

Beyond the noise

Geopolitical headlines can be unsettling, but they shouldn’t distract investors from the deeper forces shaping markets. The shift from a post-war, US-led order to a more multipolar world isn’t inherently bad for long-term returns – but it does demand greater focus on diversification, resilience and long-term strategy.