Patrick Fearon-Hernandez, CFA | PDF
In mid-2022, we published a report showing that as the United States begins to step back from its traditional role as the global hegemon, the world is fracturing into relatively separate geopolitical and economic blocs. Our study looked at almost 200 countries around the world and aimed to objectively predict which bloc each of those countries would end up in, i.e., the evolving U.S.-led bloc, the China-led bloc, the blocs that lean one way or the other, and a neutral bloc. The study predicted that this global fracturing would have major effects on the world’s economy and financial markets, for example, by boosting commodity prices, inflation, and interest rates.
In this report, we deepen the analysis to examine how the U.S. and China will lead their respective blocs, and what that might mean for the global economy and financial markets. We pay especially close attention to the implications for the U.S. dollar and the Chinese yuan as well as the broader implications for investors.