Investors pivot to physical assets as deglobalization reshapes markets

Bridgewater Associates co-CIO Karen Karniol-Tambour and Gavekal CEO Louis-Vincent Gave argue that the world has entered a state of modern mercantilism. Governments are no longer focused solely on cost-cutting; they are aggressively securing supply chains, rare earth minerals, and energy infrastructure to mitigate potential weaponization of trade vulnerabilities. This shift, coupled with the massive power requirements of artificial intelligence, is fueling a structural inflationary environment that renders the old 60/40 portfolio model increasingly obsolete.

For decades, U.S. Treasuries served as the world’s ultimate reserve asset. However, Gave noted that the freezing of Russian reserves following the invasion of Ukraine forced a global reassessment of financial safety. Nations are now pivoting away from debt-based reserves in favor of tangible commodities like oil, fertilizer, and industrial metals. This transition is exacerbated by aging demographics and rising fiscal deficits in developed economies, which keep the cost of capital elevated.

While the market fixates on semiconductor valuations, the real bottlenecks are emerging in power generation. Gave identified copper as a high-conviction play, essential for the massive grid expansions required to support data centers and renewable energy. Karniol-Tambour remains focused on gold, citing it as the ultimate store of value in an era of heightened geopolitical uncertainty. As the structural need for physical security grows, both experts suggest that the era of relying on government bonds as a hedge against market volatility has come to an end.