The past few months have been unsettling, filled with complexity and contradiction. Why? I keep asking myself. The answer seems to lie in the sheer volume of information and the opacity of motives behind competing narratives. In times like these, I try to read, watch, and listen as broadly as possible to form a well-rounded perspective (see: [[How We Explore]]). I also take a step back to look at **macro trends, economic shifts, and historical patterns** to shape my worldview. (see: [[Directional Arrows of Progress]]). When navigating uncertainty, I turn to experts, and few are better than **Aswath Damodaran**. His latest article on this topic is a must-read: [Investing, Politics & Globalization](https://aswathdamodaran.blogspot.com/2025/03/investing-politics-globalization.html). As a lifelong learner and long-term investor, I’ve always seen investing as a **balance between economic fundamentals and market sentiment**. But today, there’s a third force at play - **politics is becoming a major market disruptor**. - **Globalisation**, which fueled decades of growth, is now under siege. - The **Silicon Valley disruption playbook**, once limited to tech, is now reshaping governance. - **Markets are caught in the crossfire**, as geopolitical tensions drive volatility. The old assumptions about stability no longer hold. ### 1. **Globalisation: A Cresting Wave** 🌍 Since the 1980s, globalization has been a dominant force, integrating economies and reshaping commerce. - **China emerged as the biggest winner**, accounting for nearly **38% of global economic growth (2010-2023)**, while Europe and Japan saw their influence decline. - Consumers benefited from lower prices and greater choices, but **domestic industries and job security suffered**. - The **2008 financial crisis exposed globalization’s fragility**, leading to a rise in economic nationalism—evident in **Brexit, Trump’s election, and renewed trade wars**. ![[Pasted image 20250317135337.png ]] ![[Pasted image 20250317135524.png]] ### 2. **Disruption Playbook: From Business to Politics** 🚀 Disruption, once the hallmark of Silicon Valley, has now spread to governance. The rise of **Nayib Bukele in El Salvador** and **Javier Milei in Argentina** signals a new political era—one where leaders openly **challenge institutions and rewrite the rules**. Just as Amazon and Tesla upended traditional business models, these leaders are reshaping governance. (see: [[Execution x Evolution x Disruption]]) > But while businesses can afford to "move fast and break things," **governments cannot**—not when millions rely on them for healthcare, social security, and infrastructure. This shift has profound implications for stability and market confidence. ### 3. **Markets Caught in the Crossfire** 📉 Geopolitical tensions are no longer just headlines, they are **market-moving events** **Tariffs and trade wars** are forcing companies to rethink supply chains, hitting multinational corporations hardest: ![[Pasted image 20250317140829.png]] The **tech giants - where 59% of revenues come from outside the U.S.—are particularly vulnerable**, while domestic-focused companies may gain an edge: ![[Pasted image 20250317140844.png]] Meanwhile, market risk is rising: The **equity risk premium** (expected investor return above the risk-free rate) has **spiked to 4.68% - its highest level since Jan ‘24**. This signals increasing uncertainty and a shift in investor confidence. (see: [[Asset Pricing]]) ![[Pasted image 20250317140031.png]] ### **4. Democracy in Decline** Another major force at play: **declining trust in democratic institutions**. - Globalisation **concentrated wealth** among multinational corporations and financial hubs. - Meanwhile, **wages stagnated** for middle- and lower-class workers. ![[Pasted image 20250317135828.png]] As a result, public **disillusionment with traditional parties** has surged, leading to a rise in **populist, anti-globalization leaders**. However, rather than reinforcing democracy, many of these leaders have veered toward **authoritarian governance**, accelerating the downward trend in global democracy rankings. The **economic anxiety fueling political shifts is not going away** and neither are its market consequences. ### **So What?** For investors, the takeaway is clear: 👉 **Politics is now a market driver.** The days of investing purely on fundamentals are over. **Government policies, trade regulations, and political disruptions will increasingly dictate winners and losers.** Expect volatility and consider **small-cap, domestically oriented companies** as potential safe havens in a de-globalizing world.