by Patrick Fearon-Hernandez, CFA | PDF
The Russia-Ukraine war has transformed the world in the blink of an eye. We think the war and its aftermath will reverse much of the economic globalization of recent decades and cleave the world into two or more blocs with only limited interplay. We believe sanctions on Russia will discourage many central banks from seeing the U.S. dollar as their preferred reserve currency. We see an isolated Russia being forced into an even tighter relationship with China, where it will be the junior partner.
Now that it’s easier to see the geopolitical and military threats from authoritarian leaders in China, Russia, and beyond, we believe the war has also ushered in a new era of high defense spending. We expect that countries around the world will now invest much more in national defense than they have in decades. This report examines the implications of higher defense spending within NATO and the potential ramifications for investors.