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Karen Karniol-Tambour: Today’s Radically Different Market Environment

In this Bridgewater Associates interview, Co-CIO Karen Karniol-Tambour discusses the firm’s latest outlook on the global economy, the investment landscape, and the urgent threats facing portfolios. The conversation centers on the shift to a new era of “modern mercantilism,” the implications for US assets and the dollar, the rising risk of recession, and the role of technological disruption, particularly artificial intelligence (AI).

Here are the key takeaways:

  • A New Era: Modern Mercantilism Is Reshaping the Investment Landscape:

The global economic environment has fundamentally changed from the past decades of US-led globalization and secular disinflation. We are now in a period of “modern mercantilism,” where countries prioritize national wealth accumulation, geopolitical strength, and economic self-sufficiency. This shift is not temporary and cannot easily be reversed, even with potential changes in political leadership.

  • Policy-Induced Slowdown and Rising Recession Risk

The transition to modern mercantilism, marked by tariffs, industrial policy, and increased uncertainty, is expected to cause a policy-induced global slowdown. The US faces a rising probability of recession, with uncertainty and direct effects from tariffs both acting as significant drags on growth. Other major economies are also affected, though some may offset the impact with proactive fiscal policy.

  • US Assets and the Dollar Face Exceptional Risks

US financial assets-especially equities-are highly vulnerable due to their heavy concentration in global portfolios and reliance on foreign capital inflows. The loss of trust in the US as a reliable partner and the potential for capital outflows create structural pressures on both US assets and the dollar. The dollar’s long-term secular rise is unlikely to continue, and investors should reconsider their currency exposures.

  • Central Banks, Especially the Fed, Are More Constrained

The Federal Reserve’s ability to respond to economic downturns is more limited than in the past, due to inflationary pressures from tariffs and the risk of capital outflows. While some other central banks may be able to ease more aggressively, the Fed faces a tougher balancing act, increasing the vulnerability of US assets.

  • AI as a Major, Uncertain Disruptor

The rise of AI and machine learning represents a once-in-a-generation technological disruption that will interact with the current economic environment. While AI could offset some productivity drags from mercantilist policies, expectations for its economic impact are already high, and there is significant uncertainty about which companies or sectors will ultimately benefit.

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Disclaimer of liability

The above has been prepared by Børsgade ApS for information purposes and cannot be regarded as a solicitation or recommendation to buy or sell any security. Nor can the information etc. be regarded as recommendations or advice of a legal, accounting or tax nature. Børsgade cannot be held liable for losses caused by customers’/users’ actions – or lack thereof – based on the information in the above. We have made every effort to ensure that the information in the above is complete and accurate, but cannot guarantee this and accept no liability for errors or omissions.

Readers are advised that investing may involve a risk of loss that cannot be determined in advance, and that past performance and price development cannot be used as a reliable indicator of future performance and price development. For further information please contact info@borsgade.dk

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