We believe many embedded market assumptions are no longer valid. For decades, geopolitics was mostly irrelevant; interest rates were broadly falling; companies sent factories to China, which kept inflation and wages low while boosting profits; we lived in a unipolar world dominated by the US and with global trade protected by the US navy; and social media was a mere distraction, while monetary policy served as a market tailwind.

Today, geopolitics is relevant — we have a great power competition between the top two economies. Interest rates are higher; supply chains are being moved from China to other emerging markets and the US; we worry about the cost of climate change; social media has influenced voter behaviour, which in turn threatens democracy; and fiscal policy has superseded monetary policy since 2020. The effects of rapid progress in artificial intelligence (AI) add new uncertainty...

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