Performance Strategy and Risk Discipline in a World Beyond Rules
Article from Beat Wittmann, Chief Investment Strategist @ Key Family Partners
Geopolitics, Economies, Markets in Epochal Transformation
The geopolitical landscape is marked by accelerating fragmentation driven by nationalism and populism, the erosion of centrist political parties, and the rise of strongman leadership models. The traditional rules-based order continues to deteriorate, giving way to a system increasingly defined by opportunistic transactionalism and utilitarianism — whether in dealings with adversaries or alliance partners.
The United States, China, and the European Union remain the dominant actors shaping this new reality, while most other nations are forced, to varying degrees, into roles as policy- and price-takers. The U.S., under Trump-era leadership and the “Project 2025” agenda, has fully embraced an approach of strategic unilateralism — favoring bilateral handshake deals over enforceable contracts and multilateral commitments.
Switzerland, for instance, experienced the brunt of Trump’s arbitrary and punitive 39% tariffs, with little leverage to counter such damaging outcomes. In contrast, Taiwan has demonstrated strategic resilience in this environment — securing its sovereignty not through political guarantees but through technological dominance in high-demand semiconductors.
Another case in point is Trump’s selective and unilateral approach to Latin America: pressuring Mexico by designating drug cartels as terrorist organizations, escalating military actions against Venezuela, imposing punitive tariffs on Brazil because of his personal ties to former president Jair Bolsonaro, and extending multibillion-dollar loans to his libertarian friend Javier Milei in Argentina’s defaulting economy.
Global Economic Fragmentation and the New Regional Order
The global economy is undergoing a structural realignment shaped by protectionism and regionalization. Nationalist-populist agendas — often through unlikely alliances across the political spectrum — are reshaping economic policy at the expense of long-term growth, competitiveness, and fiscal discipline.
In the U.S., institutional checks and balances are being systemically weakened, while administrative disruption is pursued as a political strategy, exemplified by government shutdowns and arbitrary hiring&firings of senior leaders across government institutions.
Globally, excessive debt levels and fiscal profligacy are being addressed not through reform or restructuring, but through financial repression — including regulatory interventions, capital controls, forced conversions, and unilateral changes in taxation. It feels as though we are returning to the pre-globalization policy and cold and hot wars world of the 1970s.
As protectionism deepens and policy predictability erodes, the contractionary effects on growth, employment, corporate profits, and tax revenues are becoming increasingly visible. This accelerates the shift toward regional blocs focused on resilience and self-sufficiency.
Epochal geo-economic changes — triggered by the post-GFC (2008) era, post-Brexit (2020), post-COVID (2020–23), and the Russia–Ukraine war (since 2022) — have further reinforced this transition. Nations now prioritize local value chains, strategic autonomy, and security over the once-dominant ideals of global efficiency and open markets.
Key Investment Themes, Risks, and Opportunities
Capital markets remain in a risk-on phase, fueled by abundant liquidity, strong equity momentum, and confidence in central bank backstops (including a Trump put)— which still have ample capacity to mitigate sovereign or major corporate defaults.
Global equities remain the preferred asset class, supported by plentiful liquidity and investor sentiment driven increasingly by greed rather than fear. Yet, the risk of spikes in volatility and sharp price setbacks is rising — potentially triggered by a major corporate collapse, sovereign default risks (such as Argentina), or a fiscal and currency crisis emanating from the UK. Policymakers, however, are expected to intervene swiftly to contain such fallout – and the retain plenty of capacity to do so.
U.S. markets continue to lead, anchored by large-cap growth in technology and finance, while we favor Europe (and the EUR) as it offers compelling valuation opportunities amid restructuring and accelerating reindustrialization efforts. Our focus is on Germany and sectors such as industry, defense, technology, infrastructure, and finance. The key drivers of continued superior returns are unprecedented investments and reforms aimed at strengthening and expanding Europe’s strategic autonomy.
Successfully managing investment exposures amid rising uncertainty requires analyzing and managing the interdependencies between geopolitics, global economics, and capital markets — from both a macro and corporate bottom-up perspective. In a world of rising geopolitical uncertainty and regional economic divergence, the most successful investors will be those who remain agile, adaptable, and prepared for the previously unthinkable.
