LIVE MARKETS-'The world has too much America in its portfolio' - Kairos

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"THE WORLD HAS TOO MUCH AMERICA IN ITS PORTFOLIO" - KAIROS

Kairos strategist Alessandro Fugnoli says current American politics bear resemblance to periods when global empires went through a voluntary unwinding, a phase typically marked by uncertainty and chaos.

"Trump makes one think of those Roman emperors, like Diocletian, who sought to halt the deterioration of public finances or decentralise an empire that had become too vast to defend, even withdrawing from some distant provinces."

As the global economic and political landscape undergoes a major shift, Fugnoli observes that the changing dynamics are driving a redirection of capital flows.

"The world is discovering it has too much America in its portfolio", he says.

"The old pattern, where the U.S. pumped dollars into its economy through deficits which were used to buy foreign products and then invested back into the U.S financial market, is reversing. As America saves and Europe and China spend, money is now flowing out of the U.S. and into Europe and China."

In essence, the U.S. is no longer the sole magnet for investment, as Europe and China's increased spending is attracting capital that previously flowed into the U.S..

Fugnoli suggests that a sense of "end of empire" is emerging, leading to a "free-for-all" in investment strategies. He believes that previously correlated global assets will now diverge, creating opportunities for active allocation to outperform passive portfolios.

That said, he cautious against exaggeration, noting that while the American empire may be diminished, it isn't over.

"It's unlikely that an America in a bear market can find itself side-by-side with the rest of the world in full recovery".

(Danilo Masoni)

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