Today's deglobalized world of geoeconomic and geopolitical competition between superpowers is shaping the re-distribution flows of financial and economic resources. As the U.S. rapidly onshores its productive capacity into the G7+ realm of advanced economies, China and Russia are drawing up national security, and geopolitical bridges while strengthening trade and financial links within the BRICS+ alliance.
Traditional economic models suggest that the end game of these processes will be lower cost of capital, lower investment, slower economic growth, and shallower innovation and productivity growth in the demographically challenged West. This Japanification view of the future, however, is often offset by the references to new technological frontiers (AI, quantum computing, energy transitions, etc.) that promise to remove constraints of aging demographics and ossified institutions, unleashing a new era of growth and progress in the West.
At this moment in time, therefore, Western model of economic development offers us two striking alternatives: (1) stagnation as the G7+ awaits for the demographic pyramid in the emerging markets to follow - with a lag - the Western demographic trends; and (2) technology-anchored escape from stagnation that removes demographic constraints on growth and investment. The next 5-10 years in the global investment markets will reflect the immense uncertainties that the choice between these two alternatives implies for future returns.
Buckle your seatbelts. It is likely to be a rough ride.
Constantin Gurdgiev
