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● Era of Upheaval

Unveiling the Big Picture of the Stock Market and Key Risks of Global Economic Transition

Changes in the Current Economic Environment and Global Shocks

Instead of focusing solely on short-term stock market gains or Nasdaq news, we need to recognize that we are at a turning point in changes that are shaking the world.
As Bridgewater’s analysis suggests, the traditional global economic order and monetary system are undergoing rapid changes.
This article focuses on modern mercantilism and four major economic risks.
We will explore the essence of the economic transition, focusing on keywords such as global economy, investment strategy, US bonds, Nasdaq, and technology innovation.

1. Modern Mercantilism and Its Background

In Europe during the 16th to 18th centuries, there was a mercantilist strategy where countries accumulated gold, silver, and precious metals, increasing exports and reducing imports.
Similarly, today, self-centered policies such as the Trump policies in the United States and the industrial revival policies in China and Japan are spreading worldwide.
Nation-led economic policies are inherently disrupting free competition and distorting the natural flow of economic growth.

2. Risk Factor 1 – Risk of Growth Slowdown

Policy-led economic growth strategies encourage forced growth attempts instead of natural market competition.
This may lead to higher short-term growth rates, but it also carries the risk of growth slowdown in the long term.
This situation causes constant anxiety for global investors.

3. Risk Factor 2 – Loss of the Fed’s Response Capability

In the past, the Fed actively responded to economic recessions, but recently, the role of the central bank may be reduced due to policy pressures led by the government.
Although several central banks within and outside the United States may step in, the reduction in the role of the US Federal Reserve could have a major impact on the global economic system.

4. Risk Factor 3 – Increased Burden on Globally Dominant Companies

Global corporations that heavily rely on profits outside the United States face significant risks due to protectionist policies and tariffs.
In particular, the high valuations of the US Big Tech companies (M7) could be greatly shaken if self-centered policies are fully implemented.
Along with this, uncertainty about the future growth potential of global companies is increasing from an investment strategy perspective.

5. Risk Factor 4 – Capital Outflow Problem from US Assets

The high returns on US assets, especially bonds and stocks, depend on the inflow of foreign capital.
However, there is an inherent risk of sudden capital outflow due to a weakening dollar, rising US bond yields, or global capital movements.
This issue could become the most serious problem if American exceptionalism weakens.

6. Prospects for Technological Innovation and Alternative Assets

Bridgewater mentions that technological innovation can change the economic landscape in many ways.
However, like the past examples of artificial intelligence and internet companies, there is a risk that performance may not follow the initial high expectations.
Discussions on the revaluation of traditional assets such as gold and digital assets such as Bitcoin are becoming increasingly active.

7. Conclusion – Weakening of American Exceptionalism and Portfolio Restructuring

Overall, the risks to the US-led economic order and US assets are becoming increasingly prominent.
In this situation, the existing portfolio structure may collapse, and it is urgent to establish a new investment strategy.
The market going forward is likely to show a complex aspect where various risk factors and opportunities coexist, rather than leaning to one side.
Both institutional and individual investors need to respond sensitively to changes in the global economy.

– We must pay attention to the structural changes in the global economy rather than the short-term rise in the stock market.
– Modern mercantilism: the spread of self-centered policies in the United States, China, and Japan.
– Risk 1: Risk of policy-led growth slowdown.
– Risk 2: Loss of the Fed’s response capability and reduction of the central bank’s role.
– Risk 3: Protectionist risks and overvaluation problems of global corporations.
– Risk 4: Risk of capital outflow from US assets.
– Portfolio restructuring is needed due to discussions on technological innovation and alternative assets (gold, Bitcoin).

[Related Articles…]
Re-examining Global Mercantilism
Weakening of the Fed's Role and Future Prospects

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