BCA Geopolitical: US outperforms, but don’t underestimate the multipolar world
2024.06.20 17:28
Investing.com – BCA have released their geopolitical analysis on the US’ global position, which continues to be exceptional despite not being unipolar.
The US’ financial assets and its currency have consistently outperformed global peers since the Great Recession, despite the country’s domestic political polarization and the multipolar nature of the geopolitical landscape.
The analysis suggests that the ongoing geopolitical strife, particularly China’s competitive approach towards the US and the West, will likely perpetuate this outperformance in the near term.
However, the paradox lies in the US’s strategy to reduce polarization through large deficits and debt. If this strategy succeeds, it could ironically lead to the underperformance of US assets, especially if China decides to shift gears and pursue economic reform instead of geopolitical conflicts.
The US has shown exceptional economic strength, with its stock markets booming over the last 20 months. This boom was fueled by substantial government spending, effective inflation control by the Federal Reserve, and an influx of global capital into US tech companies amidst an AI boom.
Despite a global manufacturing slowdown worsened by China’s property bust, the US dollar remained resilient due to increasing relative interest rates.
However, analysts underscore that the world is not unipolar. The US’ ‘unipolar moment’ in the 1990s following the Soviet Union’s collapse never solidified into a global empire due to political infighting, unnecessary foreign wars, and financial crises. The current challenges from Russia and China further underline this multipolarity.
The report also warns investors not to take US outperformance for granted. A significant military or strategic defeat at the hands of a peer competitor like China could lead to a loss of global status for the US.
Similarly, if American political dysfunction results in economic dysfunction, or if emerging markets, particularly China, become less dysfunctional, a fundamental shift could occur. This shift could trigger a rush of free global capital away from the US and into the nascent Russo-Chinese-led Eurasian bloc of economies.
