When Globalization Fractures: Investing in the Post-Neoliberal Era

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• Investors have relied on globalization and free markets for decades; however, these assumptions are slowly breaking down.
• Governments are now shaping markets directly through tariffs and strategic controls, making politics a core investment risk rather than background noise.
• In this more fragmented, post-neoliberal world, successful investing depends less on precise forecasts and more on understanding political constraints and adapting to new rules as they form.

For much of the past several decades, investors operated within a global system that felt unusually coherent. Capital moved freely across borders and supply chains stretched wherever costs were lowest. Labor, goods, and information flowed with fewer constraints than at any other point in history. Governments set the rules but largely avoided shaping outcomes directly. Markets were trusted to allocate resources more efficiently than politics ever could.

This arrangement came to be known as the neoliberal order, though most investors rarely used that term. They did not need to. The system worked well enough that it faded into the background, becoming less a theory than a set of assumptions embedded in forecasts, models, and long-term expectations.

What matters now is not whether that order was good or bad, fair or unfair. What matters is that many of its core assumptions are no longer holding. And when assumptions change, markets rarely react all at once. They adjust slowly, unevenly, and often in ways that feel confusing at first.

The Assumptions Investors Stopped Questioning

Every investing era rests on beliefs that eventually stop being true. The danger is not that those beliefs are foolish, but that they become invisible.

Under the neoliberal framework, several assumptions shaped how investors understood risk. Free trade would expand, not retreat. Supply chains would continue optimizing for efficiency. Labor would move toward opportunity. Capital would remain mobile. Central banks would operate independently. Political systems, while imperfect, would broadly converge around shared norms.

These ideas became so familiar that they were rarely debated. When crises occurred, the expectation was that markets would correct, policymakers would stabilize, and the system would endure. Over time, this confidence hardened into something closer to certainty. That certainty is now being tested.

When Governments Stop Acting as Neutral Referees

One of the most important changes underway today is not ideological, but practical. Governments are becoming more willing to shape markets directly, and less concerned about preserving the appearance of neutrality.

Tariffs are no longer treated as temporary distortions, but as tools of industrial policy. Reshoring is pursued even when it raises costs. Capital is welcomed selectively. Immigration is constrained despite persistent labor shortages. Regulatory decisions increasingly reflect strategic priorities rather than efficiency alone.

These choices typically involve economic tradeoffs that would have been unacceptable a generation ago. Now, those tradeoffs are justified in the language of national security, resilience, and domestic stability.

From an investor’s perspective, the question is not whether these policies are optimal in theory. The question is whether they are politically durable. Markets can adapt to almost any rule set, but they must understand which rules matter most. Increasingly, political constraints are becoming as important as economic ones.

Stability, Power, and Market Adaptation

As governments play a larger role in shaping economic outcomes, questions of power naturally move closer to the surface. This does not mean markets suddenly stop functioning under less liberal systems. History suggests otherwise. Capital has adapted to a wide range of political structures, including highly centralized ones.

In some cases, centralized power can even create the appearance of stability. Decisions are made quickly and policy direction seems clearer. Opposition is muted, too. For markets focused on near-term predictability, this can feel reassuring.

The risk is not that such systems fail immediately, but that they weaken the feedback mechanisms markets rely on over time. When dissent is costly and information becomes politicized, errors persist longer. Adjustments arrive later and more abruptly. What appears stable can mask growing fragility beneath the surface.

For investors, the challenge is not to moralize these systems, but to recognize how they alter risk dynamics. Stability and safety are not the same thing, and markets do not always distinguish between them until circumstances force the issue.

From One Global Market to Several Regional Ones

The old global order assumed integration. The emerging one increasingly assumes fragmentation.

Instead of a single global market governed by shared norms, the world now looks more like a collection of regional systems, each shaped by its own political priorities. Capital still moves, but with more restrictions. Trade still occurs, but under more conditions. Technology still advances, but behind borders.

In this environment, diversification behaves differently. Owning assets across regions no longer guarantees exposure to the same rulebook. Supply chains become political assets. Energy, food, data, and defense take on strategic importance beyond their immediate cash flows.

The globalization premium that rewarded scale and efficiency begins to fade. In its place, a fragmentation premium emerges, favoring adaptability, redundancy, and alignment with local power structures. This does not imply a collapse of global markets. It implies a change in how global exposure should be understood.

Affordability as a Political Constraint

One of the strongest forces driving this shift is affordability. Rising asset prices were once seen as a sign of economic success. Increasingly, they are viewed as a source of political strain. New York City’s mayoral election was just the latest example.

Housing, healthcare, education, and energy costs continue to rise faster than wages in many economies. Even where growth remains solid, lived experience feels worse. When economic progress fails to translate into everyday improvement, political legitimacy erodes.

Affordability concerns push governments toward intervention. They encourage policies that alter markets rather than simply regulate them. They make political leaders less tolerant of outcomes that appear efficient on paper but unpopular in practice.

For investors, affordability is not a social issue. It is a structural one. It influences labor markets, consumption patterns, electoral outcomes, and policy volatility. Ignoring it risks misunderstanding the environment in which markets operate.

The Limits of Prediction

Periods of regime change tend to frustrate forecasters. Models built on the old order continue to function, but with growing blind spots. Relationships that once felt reliable weaken or reverse, and signals become noisier.

In these moments, precision often becomes a liability. Investors who anchor too tightly to forecasts risk missing the broader shift underway. Those who focus instead on constraints, incentives, and adaptability are usually better positioned.

The most important questions are not about short-term outcomes, but about long-term structure: Is capital truly mobile? Are margins protected from political pressure? Is independence still valued over alignment? Is efficiency still the dominant objective? When the answers change, portfolios must evolve as well.

What Endures When Systems Change

Markets have survived wars, revolutions, and regime shifts. They have adapted to democracies, autocracies, and everything in between. What they struggle with most is not volatility, but unfamiliarity.

The transition away from a familiar global order does not happen cleanly. It unfolds through contradictions, partial reversals, and policy experiments that often appear inconsistent. That messiness is not a sign of failure. It is a feature of change. For investors, the task is not to predict the new system in detail, but to recognize that the old one no longer provides a reliable map. Flexibility, balance sheet strength, and optionality matter more in such environments. So does humility.

Living Through the Middle of the Transition

Every generation tends to believe the rules it learned are permanent. They rarely are.

The end of an era does not arrive with clarity. It emerges gradually, through discomfort, policy drift, and the realization that familiar assumptions no longer explain what is happening. Only in hindsight does the transition appear obvious.

The world that rewarded frictionless globalization, political convergence, and technocratic neutrality appears to be giving way to something more fragmented and power-driven. Markets will adjust, as they always do.

The harder adjustment belongs to investors themselves. Letting go of assumptions that once felt solid. Accepting that uncertainty does not signal collapse, only transition. And recognizing that the future rarely looks radical when you are living through it. It simply feels unfamiliar.

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This is based on an episode of Top Traders Unplugged, a bi-weekly podcast with the most interesting and experienced investors, economists, traders and thought leaders in the world. Sign up for our Newsletteror subscribe on your preferred podcast platformso that you don't miss out on future episodes.