Bi-Weekly Geopolitical Report – Opportunities and Risks in a Tripolar Nuclear World (May 15, 2023)

Patrick Fearon-Hernandez, CFA | PDF

Some 30 years into China’s development boom, it’s no longer controversial to say that tomorrow’s global investment environment will be shaped by Beijing’s effort to displace the United States as the world’s dominant country.  China remains focused on building its various sources of power, whether they be political, economic, technological, or military.  We have examined those sources of power and their implications for investors in various publications.  This report dives deeper into one aspect of China’s growing military power: its new effort to expand its arsenal of strategic nuclear weapons and the means to deliver them against the U.S.

China’s nuclear buildup will result in a scarier, less stable world.  Many investors and investment managers will be tempted to close their eyes to this uncomfortable risk.  Here at Confluence, we think it’s better to understand this important trend and incorporate the resulting opportunities and risks into our investment strategies.  It may seem strange to mention opportunities in relation to a potential nuclear arms race, but history shows that riches are often made during times of war or international tension.  Although nuclear war is unthinkable and unwinnable, preparation for a conflict will require investment and economic allocation.  Portfolios should take this spending into account.  In discussing the investment implications of China’s nuclear buildup, we therefore identify both the opportunities and the risks that may arise.

Read the full report

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