Geopolitics: Understanding the long term shifts behind the headlines

Despite this, markets have remained broadly resilient, serving as a reminder that short term headlines don't necessarily translate into long term market direction. 

What is changing, however, is the broader geopolitical environment. We are seeing signs of a more assertive and resource focused policy approach from major powers, especially the United States. Recent actions suggest countries are focusing more on securing access to important raw materials, shaping their trade relationships, and strengthening partnerships that support their national interests. This shift is sometimes referred to as a modern form of mercantilism, an economic theory that a nation's wealth and power are best served by maximising exports and minimising imports. This renewed focus on trade represents an important long term trend that may influence markets gradually over the coming years. Further, these trends point toward a world where uncertainty is structurally higher than it has been in over a decade.

A more assertive US foreign policy is taking shape

Recent episodes seem to be part of a wider strategic pattern. The US is signalling a willingness to use economic pressure, trade policy, diplomatic leverage and, at times, military force to protect its interests in the western hemisphere and beyond.

This has included:

• Greenland – tariff threats used to apply pressure around Arctic security and access to critical minerals
• Venezuela – direct intervention following months of economic and financial restrictions on the Maduro government
• Latin America more broadly – efforts to steer political and economic alignment toward the US and limit China’s influence
• Iran – diplomatic pressure paired with increased military presence

These actions are unlikely to be one offs. They reflect a strategic environment where resource security, geopolitical influence and economic leverage are increasingly seen as intertwined.

How these long term shifts could affect markets

1. A more inflation prone environment: Moves toward greater self sufficiency, shifting supply chains and higher strategic and military spending all add to cost pressures. Geopolitical friction tends to make global trade less efficient, which can keep inflation higher than it was in the decade before the pandemic.
2. Diversification away from US assets: We are seeing early signs of change in trade and where countries are allocating their money. Some US allies in Europe and Asia, who hold large amounts of US financial assets, are gradually diversifying their relationships and building more domestic resilience. Even small shifts in the way global monies move can influence currencies, government bond yields and long term performance across regions. In January, that showed up through broad US dollar weakness as investors moved towards gold, which they saw as a safe haven asset amidst heightened geopolitical tensions involving the US. We also saw sharp swings in precious metal prices, driven by uncertainty and changes in the assets central banks and investors favoured, as the US dollar continued to decline.
3. Divergence in asset class performance: Developed market equities have been resilient overall but, as you dig deeper, there are regional and sectoral performance differentials. European defence stocks and industrial metals have benefited over the past year from rising security and supply chain priorities, while gold has attracted renewed interest as a diversifier during periods of geopolitical stress, benefiting mining stocks.

Together, these shifts show how geopolitics can influence markets not only through sudden shocks, but through gradual changes in behaviour, policy and capital allocation over time.

Why perspective matters more than the headlines

As we have seen already in 2026, events can unfold quickly, and it can be tempting to react to each new headline as if it signals a major turning point. However, geopolitics tends to work on longer timelines. Territorial disputes, shifts in alliances, or changes in national strategy usually unfold over months or years, rather than days. That’s why we anchor our thinking in clear trends, focusing on what we can assess with confidence, where the uncertainty lies and how different scenarios may affect long term outcomes. This helps us avoid overreacting to short term volatility while staying alert to the deeper shifts that can influence markets over time.

Our investment stance

Despite the geopolitical noise, our broader market outlook remains constructive: Economic activity is holding up well, company profits, particularly in the US, continue to show resilience, and policy around interest rates, taxes and spending across major economies remains supportive. 

We retain a moderately positive stance on equities and expect opportunities to add to them if markets experience periods of volatility, and nothing fundamentally changes in companies’ profits and overall business health. At the same time, we are watching key geopolitical indicators closely, including movements in reserve currencies, developments across defence and commodity linked sectors, shifts in global capital flows, and the policy responses emerging from Europe, Japan and major Emerging Markets.

Summary

Geopolitical tensions will continue to rise and fade, but their most lasting effects tend to build slowly as policies, alliances and capital flows shift over time. These changes shape the investment landscape over years rather than days. By staying disciplined, keeping our focus on economic fundamentals and watching the bigger trends, we can look through short term volatility and keep portfolios well positioned for long term opportunities while managing the risks of a changing world.