The central market is whether the world that produced the last forty years of portfolio construction still exists. The answer, increasingly, is: only partially.
Modern mercantilism, AI infrastructure, fiscal pressure, war risk, and the re-pricing of national security are becoming market forces in their own right. Bridgewater has described the current moment as two overlapping “resource grabs”: one driven by modern mercantilism and one driven by AI demand for compute, energy, chips, land, and infrastructure. The result is a world in which the most valuable assets may no longer be only intangible claims on future cash flows, but also control over chokepoints, energy systems, minerals, compute capacity, manufacturing capacity, and political access.
This does not mean abandoning equities. It means abandoning the illusion that a global equity index is automatically diversified.
1. The New Macro Regime: Mercantilism, AI and Worries from the US
The post-1990 market regime was built around a convenient assumption: goods would move freely, capital would move freely, energy would be available, geopolitics would stay mostly local, and the US-led system would remain the operating system of globalization.
That assumption is weakening.
The new regime is more mercantilist. Governments increasingly view supply chains, semiconductor capacity, energy infrastructure, data centers, shipping lanes, currencies, and defense production as strategic assets rather than neutral market inputs. This is why commodity shocks, AI infrastructure shortages, export controls, sanctions, and defense spending are no longer side stories. They are the story.
AI intensifies this shift. The AI boom is not only a software boom; it is a physical capex boom. McKinsey expects inference to become the dominant AI workload by 2030, while Goldman Sachs has warned that data-center power demand could rise dramatically, with occupancy tightening into 2026 before new capacity arrives. The investment implication is that the winners may not be only model companies or application software names, but also the owners of power, cooling, semiconductors, data centers, grid equipment, land, and industrial inputs.
There is a second, less comfortable issue: the US itself is becoming a source of market-integrity and institutional-risk questions. Recent Office of Government Ethics filings disclosed a very large number of securities transactions associated with President Trump’s portfolio in Q1 2026; public reporting has estimated the transaction value in the hundreds of millions of dollars, with the filings’ broad reporting ranges limiting precision. The important portfolio point is not to make a legal conclusion. It is that investors must price a world in which political access, industrial policy, and market outcomes are becoming more tightly intertwined.
Fiscal pressure compounds the problem. Populism, defense spending, energy shocks, industrial subsidies, and social commitments all point toward persistent government spending. For highly indebted states, inflation can become politically easier than austerity. That does not mean policymakers explicitly choose inflation, but it does mean cash is not risk-free in real terms. In a fiscal-dominance world, the risk is that money becomes the adjustment variable.
For investors, the message is clear: cash has optionality, but long-term cash has danger. Nominal safety can become real loss.
2. Scenario Thinking and Portfolio Resilience
The mistake in this environment is to forecast one future with confidence. The better approach is to build a portfolio that can survive several plausible futures.
Ray Dalio recently argued that the US-Israel-Iran conflict should be seen as one front in a broader world conflict that also includes trade, technology, capital, geopolitical influence, Ukraine, Taiwan, and the South China Sea. He considers risk of a wider conflict as high as 30-40% with the greatest riks period in 2028. Whether one accepts the full framing or not, the useful investment lesson is that war risk is no longer a tail risk that can be ignored; it is a recurring state variable.
History is useful here, not as a map, but as a warning. In 1937, US equities fell roughly 35%; in 1938 they rebounded more than 31%; 1939 was roughly flat; and during the US war-effort years of 1942–1945, annual equity returns were strong. The lesson is not “buy defense stocks.” The lesson is that war and pre-war periods can produce violent rotations, deep drawdowns, and unexpected winners — often in industries that were still niche before the conflict accelerated demand.
The 1937 analogy also shows why geography matters. Gold preserved purchasing power and liquidity in threatened regions, but produced no operating cash flow. Equities were dangerous in the short run but could be powerful if held in the winning economy. Bonds were safe only if the issuing state remained solvent and victorious. Real estate and land could preserve value, but only where they were not destroyed, confiscated, or trapped behind capital controls.
This leads to three five-year scenarios:
Scenario 1 — AI productivity and soft landing
Probability: 45%
AI capex remains strong, inflation moderates, productivity improves, and earnings broaden beyond the narrowest group of US mega-cap technology firms.
Scenario 2 — Stagflation, fiscal dominance and energy shock
Probability: 30%
Energy and geopolitical shocks keep inflation sticky. Governments spend more, real rates stay unstable, and investors demand higher risk premia.
Scenario 3 — Hard landing, credit event or geopolitical shock
Probability: 25%
Credit spreads widen, liquidity tightens, geopolitical shocks cause de-risking, and crowded trades unwind.
The objective is not to maximize returns in one scenario. It is to avoid being forced to sell in the wrong one.
3. Global Equity Opportunities and Risks
Global equities remain attractive over the long term, but the benchmark itself has become part of the risk. A global index appears diversified, yet it is increasingly exposed to a narrow cluster of US mega-cap technology, AI infrastructure, and Taiwan semiconductor risk. Recent ACWI holdings data show Nvidia, Apple, Microsoft, Amazon, Alphabet, Broadcom, TSMC and Meta among the largest exposures, with TSMC alone among the top global holdings.
This is not automatically bad. The US remains the world’s deepest capital market and the center of AI commercialization. The problem is price and concentration. A passive global portfolio may now represent an implicit macro bet on US exceptionalism, AI capex, Taiwan stability, dollar resilience, and US institutional credibility.
A more resilient global-equity stance would think in risk buckets rather than simple country weights:
Core global exposure: maintain participation in global productivity and earnings growth.
US exposure: prefer quality, profitable AI infrastructure, industrial enablers, and companies with real cash flow; avoid blindly adding broad mega-cap beta at elevated valuations.
Japan and UK: attractive developed-market diversifiers with valuation support, industrial depth, and currency/monetary-policy asymmetry.
Brazil and selected commodity markets: useful in inflation and resource-scarcity scenarios, but vulnerable in a global credit event. Franklin Templeton country ETF have attractive expense ratios.
Mexico: selectively attractive as a nearshoring and industrial-capacity beneficiary.
Taiwan: still a critical AI winner, but size carefully because valuation and geopolitical risk are inseparable.
India: structurally attractive, but not a bargain; position sizing should respect valuation risk.
The key question becomes: which assets win under growth, inflation, or shock?
In the current regime, real assets and strategic assets regain importance. Energy, commodities, infrastructure, defense ecosystems, industrial capacity, and companies with pricing power should not be treated as old-economy leftovers. They are part of the new macro infrastructure.
4. China and Non-US Diversification for Swiss Investors
China is cheap, but China is not simple.
The bullish case is real. China has world-class platforms, enormous engineering capacity, deep manufacturing ecosystems, cheap capital, large domestic datasets, and a policy push toward self-reliance. If global investors decide that China is investable again, the rerating could be violent. A move from depressed multiples toward more normal emerging-market valuations, combined with even modest earnings growth, could produce strong three- to five-year returns.
But China’s discount is not just a valuation anomaly. It is a required risk premium for property weakness, household confidence, regulatory uncertainty, geopolitical risk, ADR/VIE complexity, and currency risk. The IMF and World Bank have both emphasized the need for China to strengthen domestic demand, with the property sector and weak confidence remaining important headwinds.
For a Swiss investor, however, China deserves a different discussion than it does for a US investor.
The Swiss home market is high quality but narrow. The SMI contains 20 large and liquid names and represents roughly 75% of Swiss equity-market capitalization, making a Swiss-only equity allocation structurally concentrated in healthcare, staples, financials and selected industrials. Meanwhile, the Swiss franc creates a high hurdle rate: foreign returns must overcome possible CHF appreciation. In March 2026, the SNB kept its policy rate at 0% and said its willingness to intervene in FX markets had increased to counter rapid and excessive CHF appreciation.
Switzerland also has unusually pragmatic China relations. China has been Switzerland’s largest trading partner in Asia since 2010 and its third largest globally after the EU and US; the Swiss-China free-trade agreement entered into force on 1 July 2014. The PBOC-SNB swap line has also been renewed at RMB 150bn / CHF 17bn, according to Chinese official reporting.
So yes: China may deserve a larger role in a Swiss or European global portfolio than in a US geopolitical-risk portfolio. But the implementation matters.
China implementation: broad beta or selective exposure?
A broad China ETF offers cheap valuation and liquidity, but it also brings banks, insurers, SOEs, energy, property-linked cyclicals and policy-sensitive sectors. The Franklin FTSE China UCITS ETF is attractive on cost, with a 0.19% TER; recent Franklin data show roughly 1,095 holdings, total net assets around $1.68bn, a trailing P/E around 14.3x, P/B around 1.6x, and top holdings including Tencent, Alibaba, China Construction Bank, PDD, ICBC, Xiaomi, Meituan, Ping An, BYD and Bank of China.
That makes it a credible low-cost China vehicle, but not a pure technology or consumer-recovery play. It is partly a China-platform fund, partly a financials/SOE fund, and partly a broad macro China fund.
A China A-share ETF would give cleaner mainland RMB and domestic-asset exposure. The UBS MSCI China A SF UCITS ETF, for example, tracks the MSCI China A Index synthetically and has a TER of 0.24%; justETF describes the underlying index as large and liquid Chinese A-shares denominated in RMB and listed in Shanghai or Shenzhen. This is cleaner RMB exposure, but comes with A-share valuation, policy, higher expense ratios and synthetic-replication considerations.
The practical conclusion: move China from structural underweight toward but avoid treating all China exposure as equal.
Tax, legal and distress considerations
For a Swiss resident using an Irish-domiciled UCITS ETF, such as the Franklin FTSE China UCITS ETF, the key point is that Ireland generally does not add a second layer of withholding tax on distributions to non-resident investors in Irish funds, while underlying Chinese dividends may face Chinese withholding tax before reaching the fund. Irish fund tax treatment is jurisdiction-specific and should be checked with a tax adviser, but Ireland’s fund regime is often described as tax neutral for non-resident investors. China-source dividends to non-resident enterprises are generally subject to 10% withholding tax under Chinese domestic rules, subject to treaty details and eligibility.
On expropriation risk, Switzerland and China have a bilateral investment treaty framework. The China-Switzerland BIT includes protections around expropriation and compensation, while broader investment-treaty practice gives foreign investors treaty-based protections and potential arbitration rights. However, ETF investors should not overstate the practical protection. If China impaired foreign portfolio assets, legal remedies could be slow, political, uncertain and difficult to translate into timely portfolio recovery.
This is why China exposure should be sized as a compensated risk, not as a normal developed-market allocation.
5. Key Investment Principles and Derived Stance from This Quarterly Review
1. Diversification is no longer optional
Concentration risk has become systemic. Global indices are increasingly concentrated in US mega-cap technology, AI infrastructure, and Taiwan semiconductor exposure. Diversification must now happen across countries, currencies, political systems, sectors, real assets, and liquidity profiles.
2. Valuation matters
The last decade rewarded investors for paying ever-higher multiples for long-duration growth. That works when inflation is low, discount rates are stable, liquidity is abundant, and geopolitics is quiet.
That is not the base case anymore.
AI is a transformational theme, but strong narratives do not eliminate valuation risk. The better stance is to own profitable beneficiaries of AI infrastructure and productivity, while avoiding speculative extensions where the cash flows are too distant or too uncertain.
3. Real assets and strategic assets regain importance
Energy, commodities, infrastructure, industrial capacity, defense production, grid equipment, data centers and hard assets are becoming strategically valuable again. In periods of structural transition, ownership of scarce physical assets can become more valuable than claims on distant future cash flows.
Gold has a role, but not as a complete solution. It protects against monetary and geopolitical stress, but it does not compound through earnings. The more complete real-asset stance combines gold, commodity-linked equities, infrastructure, industrial capacity, and companies with pricing power.
4. Maintain global exposure, but reduce dependence on broad US mega-cap beta
The US remains indispensable. It is still the world’s innovation leader, especially in AI, software, capital markets and corporate dynamism. But valuation, concentration and political risk argue against blind benchmark exposure.
Orientation: prefer selective US quality, profitable AI infrastructure, industrial enablers, and durable cash-flow compounders. Avoid turning the whole portfolio into one bet on US mega-cap leadership.
5. China deserves selective reconsideration for Swiss investors
China’s valuation discount reflects real risks, but also substantial pessimism. For Swiss investors, the case is stronger than for US investors because Switzerland has a small and concentrated home market, a strong currency, pragmatic bilateral ties, and a need for non-US growth exposure.
Orientation: move from structural underweight toward selective neutral or moderate overweight; prioritize platforms, consumer, technology and quality exposure; remain cautious on property, state-owned banks and policy-heavy beta.
6. Favor countries and sectors linked to real assets, industrial capacity and pricing power
Japan, the UK, Brazil, selected Mexico exposure, and selected industrial or commodity-linked businesses globally look more attractive in a regime shaped by supply-chain competition, energy security, defense spending and AI infrastructure.
7. Keep liquidity and optionality
The next five years are likely to include policy shocks, geopolitical repricing, energy disruptions, credit events and rapid shifts in market leadership. Investors should preserve the ability to rebalance during stress instead of being forced to sell into it.
Closing Thought
The coming cycle may not reward the most aggressive portfolios. It may reward the most adaptable ones: diversified across currencies, political systems, real assets, technological regimes, and sources of cash flow.
In the old world, diversification was a mathematical exercise.
In the new one, it is a geopolitical necessity.
Sources: Bridgewater Associates, “Two Resource Grabs Reshaping Markets: Modern Mercantilism and AI.” Ray Dalio, “We May Be Entering a World War,” TIME, April 2026, and related reporting. US Office of Government Ethics / public reporting on Trump Q1 2026 transaction disclosures. Swiss National Bank, Monetary Policy Assessment, 19 March 2026. Swiss Federal Department of Foreign Affairs, Switzerland-China bilateral relations. SIX Group, Swiss Market Index overview. People’s Bank of China / official Chinese reporting on PBOC-SNB swap renewal. McKinsey and Goldman Sachs research on AI workloads and data-center power demand. Franklin Templeton, Franklin FTSE China UCITS ETF fund data. UBS / justETF data on UBS MSCI China A SF UCITS ETF. IMF and World Bank commentary on China domestic demand, property and confidence risks. Ireland fund-tax regime and China withholding-tax references. China-Switzerland BIT and investment-treaty protection references. Historical S&P 500 annual returns.
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