- Stock-picking isn't enough – government intervention and macro trends like AI, decarbonization, and deglobalization now shape markets.
- Focus on sectors where governments and institutions invest, such as infrastructure, clean energy, healthcare, and AI.
- Success depends on discipline, wealth bucketing, and shifting from scarcity to abundance while aligning investments with long-term goals.
The COVID-19 pandemic marked an unprecedented moment in financial history that fundamentally changed how markets operate. “Something is different here that marked a watershed,” explains Mark Haefele, Chief Investment Officer of Global Wealth Management at UBS. “Never before in history had governments deliberately shut down their economies and shocked them back to life again – unprecedented in the history of capitalism.”
Haefele, author of “The New Rules of Investing” and manager of over $4 trillion in assets at UBS, points to the scale of this intervention: government spending to shock economies back to life reached levels not seen since World War II. This dramatic shift in how governments interact with markets has convinced him that the traditional investment playbook needs to be rewritten, meaning investors can no longer rely solely on traditional methods like value investing or stock picking.
Financial markets today are not only shaped by supply and demand but also by active government intervention, structural megatrends, and the influence of investor psychology. To adapt, Mark presents a new framework for investing, starting with “The Five D's” as a roadmap to understanding today's financial challenges.
Government's new role in shaping markets
The role of government in financial markets has undergone a dramatic transformation over the past two decades. While historically more hesitant to intervene, governments and central banks have become increasingly active players in the economy—responding to financial crises with unprecedented levels of intervention.
The 2008 financial crisis marked a turning point. “There's no going back to the kind of free markets where the Fed was very hesitant to be involved,” Mark Haefele explains. “In the pandemic, they rolled out everything they had done in the financial crisis in about three days.” The scale of intervention was historic—government expenditure versus GDP in the United States reached levels comparable to World War II.
Today, governments are not just regulators but active allocators of capital, influencing asset prices and reshaping industries. For investors, this represents a fundamental shift in strategy. Haefele advises: “What are the big problems that equal big money, and then follow the big money.” In this new investment paradigm, understanding government policy and spending has become just as crucial as traditional company analysis.
The five D's
To understand where capital flows, Mark explains The Five D's—five megatrends reshaping global markets. These forces, he says, are not just macroeconomic theories; they are authentic, tangible shifts that impact portfolios—positively or negatively—depending on how investors position themselves.
Each “D” represents a major economic force with far-reaching consequences:
· Debt: Global debt levels are at historic highs. Mark points out that if “interest rates get too high, you can get financial repression,” which means central banks will suppress rates and potentially push inflation higher in the long run.
· Debt: Global debt levels are at historic highs. Mark points out that if “interest rates get too high, you can get financial repression,” which means central banks will suppress rates and potentially push inflation higher in the long run.
· Deglobalization: Trade relationships are shifting due to geopolitics, reshoring, and supply chain vulnerabilities. This is disrupting traditional economic models.
· Demographics: Aging populations in developed nations—and increasing wealth in emerging markets— translate into shifts in consumer spending and a growing demand for particular goods and services.
· Decarbonization: The shift towards cleaner energy is increasingly a security issue and a significant economic opportunity, especially as the need for clean power generation grows.
· Digitalization: The rapid adoption of AI and automation is fundamentally reshaping productivity and capital allocation across industries.
Mark's message is clear: these megatrends will drive investment returns in the coming decades. By aligning their portfolios with the Five D's, investors can position themselves ahead of the curve.
The intersection of these megatrends creates compelling investment opportunities. For instance, healthcare sits at the crossroads of demographics and digitalization – as populations age, the demand for medical services, biotech innovation, and retirement solutions will increase, while AI and automation help deliver these services more efficiently. Similarly, power generation represents the convergence of decarbonization and digitalization, where Haefele sees long-term growth potential as both government and private sector investment flow into clean energy infrastructure and smart grid technologies.
AI as an investment opportunity
While AI is often categorized under digitalization, Mark sees it as an investment megatrend in its own right—one that warrants particular attention. At the World Economic Forum in Davos, AI dominated discussions. Companies across industries are already seeing efficiency gains from AI, and Haefele believes we are still in the early innings of AI-driven transformation.
“One manager was saying he just polled his employees around how much they thought their work had improved—efficiency gains they got from just the AI that they deployed last year—it was 15%.”
As AI adoption accelerates, investment opportunities will arise in semiconductors, cloud computing, robotics, and enterprise automation. Governments are also heavily investing in AI infrastructure, meaning public-private partnerships could drive further expansion.
Mark's takeaway: AI is not a passing trend—it is a foundational shift in how businesses operate and a sector that investors should prioritize.
Mastering investor psychology
Mark stresses that investor psychology is one of the most overlooked yet critical factors in investment success.
One of his most important strategies is “bucketing” your wealth into three categories:
- Liquidity: short-term cash needs
- Longevity: long-term investments, such as stocks and bonds
- Legacy: philanthropic giving or wealth transfers
Mark argues that this approach helps investors stay disciplined during market volatility. “The liquidity bucket is what you need to sleep at night,” he says. By separating funds mentally and strategically, investors can avoid emotional, panic-driven decisions.
Another key psychological shift: moving from a scarcity mindset to an abundance mindset. Instead of hoarding cash out of fear, investors should view money as a tool to shape their lives and investment outcomes.
Finally, Mark highlights impact investing as an emerging trend. Wealthy investors increasingly want more than just financial returns—they want their money to create positive change. As he puts it: “Use your investment dollars to make a difference on your ‘social good balance sheet’ as well as your standard balance sheet.”
The shift investors can't ignore
Mark Haefele's insights aren't about predicting the future; they're about understanding what is already happening. The markets are no longer dictated solely by corporate fundamentals but by the forces shaping economies at a structural level. The investors who recognize this shift—and adjust accordingly—will be those best positioned for long-term success.
The old rules of investing, built around stock picking and passive market participation, are being replaced by a new reality: one driven by government intervention, long-term macro forces, and the psychology of wealth management.
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 Newsletter or subscribe on your preferred podcast platform so that you don't miss out on future episodes.