There have been a number of doctrines in foreign relations, some influencing portfolio allocation, but a new system of investing is developing to match the changing world order

 

Commentators on geopolitics speak regularly of the “Monroe Doctrine”, popularised by US President James Monroe in the early 1820s, closing the Americas to future European colonisation, and dividing the western hemisphere into separate American and European spheres of influence.

This strategy has recently been updated by the second Trump administration, and dubbed the “Donroe Doctrine” by the US president. It reasserts US dominance of the western hemisphere, excluding key geopolitical rivals China and Russia from access to territory and natural resources in this geographical sphere.

Portfolio managers — once absorbed only by market fundamentals and interest rates — are increasingly integrating these geopolitical risk factors into asset allocation calculations, devising their own financial version of the doctrine.

“The global economy is becoming more fractured and regionalism seems to be on the rise,” says Géraldine Sundstrom from Pictet Wealth Management

The trend is a definitive one. For Géraldine Sundstrom, head of investment offering at Pictet Wealth Management in Geneva, the geopolitical reset represents a “tectonic shift” away from a US-centric world. “The global economy is becoming more fractured and regionalism seems to be on the rise,” she says.

The turning point in US foreign policy became evident during last year’s February Munich Security Conference, where vice-president JD Vance focused on economic rivalry with Europe, meeting with the leader of Germany’s far right political movement, rather than with Chancellor Friedrich Merz.

On the alliance’s eastern flank, where Poland borders war-torn Ukraine, “nobody believes that the Americans would honour Article 5”, states Beat Wittmann, a prominent former senior banker at Swiss stalwarts UBS and Julius Baer, and more recently founder of Porta Advisors in Zurich. This, he says, demonstrates a “brutal reality” not always broadly discussed by EU leaders.

European revival

Since then, European elites have acclimatised to having to defend their own territory without Nato. Banks such as Pictet talk about a “new world order” forcing European leaders to respond to global events with greater unity. This is demonstrated by the EU’s recently signed trade deals with India and the Latin American common market of Mercosur.

“This European revival seems well underway,” claims Pictet’s Sundstrom. “As Europe pursues greater strategic autonomy, space and defence technology are key areas for growth.”

US vice-president JD Vance during the Munich Security Conference in February last year© 2025 Bloomberg Finance LP

With Germany’s fiscal expansion focused on infrastructure and defence spending, she believes innovation prospects will be further boosted by the desire of EU members to integrate their economies ahead of the 2028 target date for completing the single market. All of this bodes well for European equities, compared to US counterparts.

“Asset allocation considerations need to evolve as a consequence,” suggests Sundstrom, requiring effective management of currency exposures and reassessment of traditional fixed income safe havens, impacted by looser fiscal policy, higher government debt burdens and reduced trust in democratic institutions.

Within equities, the historical US-centric concentration is now broadening, calling for a more balanced approach, she says. “In essence: less US, more of the rest.”

Moreover, market movements associated with President Trump’s speeches — in Davos and elsewhere — increasingly suggest geopolitics should be incorporated into decision-making around investments.

This calls for a new interdisciplinary approach, embracing geopolitics, global economics and capital markets, representing a 180-degree pivot away from previous investment orthodoxy.

Among those asset allocators willing to contemplate a future beyond traditional economic and capital market disciplines, the Monroe Doctrine, is enjoying increasing airtime.

Domestic bias

Return of hard power politics, believes Wittmann at Porta Advisors, has led to fragmentation of economic interests and assets into American, European and Asian blocs, with multilateral institutions such as the UN left on the back seat for an extended period.

For European investors, the corollary of the Monroe Doctrine is becoming clear. Wittmann is recommending his clients focus on investments in their own region, backed by their reference currency, occasionally venturing into smaller satellite exposures for diversification purposes.

This has proved financially prudent. Whereas news flow has been dominated by US exceptionalism, US AI advances and the Mag 7 stocks, Europe’s markets — particularly defence stocks — and some select markets in Asia have been quietly outperforming their American cousins.

A regularly visitor to central Europe, where family offices are investing in the momentum behind the “Coalition of the Willing” partners to defend Ukraine, Wittmann believes a “vast investment universe” including military tech start-ups and battlefield technology, critical infrastructure, energy and transportation is ripe for investors.

He expects a range of funds to be launched during 2026, attracting money into private markets focused on these themes.

While few argue against the resurgence of the Monroe Doctrine, there is less agreement on its implementation.

“The US does not currently control the western Hemisphere nor does China yet control the eastern,” states Norman Villamin, group chief strategist at UBP in Geneva.

He describes a world in transition, where the US and China seek to shape “spheres of influence, which serve to enhance their own national security interests”.

“The US does not currently control the western Hemisphere nor does China yet control the eastern,” says Norman Villamin from UBP

Maritime trade

The US administration’s attempts to secure the Caribbean Sea — crucial for US maritime trade — and an Arctic Ocean coveted by Russian and Chinese navies for potential trade and military importance, have increased in intensity since Trump’s January 2025 inauguration, he argues.

Mexico’s alignment with US tariff policy against Chinese investment, Washington’s $20bn swap line with Buenos Aires, encouragement of the sale of the Panama Canal from entities controlled by Hong Kong tycoon Li Ka-Shing to BlackRock, plus Washington’s military action in Venezuela, leave access to most of the Caribbean squarely under American control.

“Many of these areas where the US and China are competing are also home to substantial mineral and energy reserves,” says Villamin. “These are critical in the competition for artificial intelligence dominance in the years ahead.”

Today’s current alliance between Russia and China — in what some see as a rival economic and investment bloc to the west — offers a powerful proposition, he suggests.

“Following Russia’s 2022 invasion of Ukraine, its pivot towards China economically and strategically leaves it squarely within China’s sphere of influence,” says Villamin.

Russia’s energy, industrial materials, and agricultural sectors offer an “excellent complement” to a Chinese economy, requiring these critical inputs to power its 21st century transformation and growth.

“Moreover, maintaining the largest Arctic border of any nation, Russia offers China the best access to both these critical future shipping lanes and the prospect of future raw material supply looking ahead, providing Russia leverage in its relationship with China.”

According to Villamin’s geopolitical reading, Europe has yet to make its choice about which power bloc to trade in. While Europe’s actions throughout 2025 signalled it was moving to align itself with the American-led order, Trump’s moves against Greenland may have created a rift within the EU about the continent’s forward path.

Temporary window

It is now more than 35 years since neoconservative analyst Charles Krauthammer coined the term “Unipolar moment” to describe the advent of a period of US dominance.

Unlike fellow political analyst Francis Fukuyama, who referred to the end of the cold war, after America’s apparent ideological and economic victory, as the “End of History”, Krauthammer correctly predicted that unrivalled dominance of a single superpower would provide only a temporary window.

Previously, Warsaw Pact countries had been tightly controlled by Moscow’s “Brezhnev Doctrine”. But the writing on the wall for this came in 1989, when Gennadi Gerasimov, Mikhail Gorbachev’s foreign affairs spokesman, jokingly described the launch of the “Sinatra Doctrine”, allowing all Soviet satellite states to go their own way.

The three decade-plus interlude which followed this juncture has led most global portfolio investors to focus on balanced, largely passive US-based portfolios to generate attractive risk-adjusted returns for clients and policyholders. A new investment doctrine is now badly needed.

“As this increasingly bipolar world order takes shape, investors will require a more active portfolio management approach and a proactive risk management approach,” suggests Villamin at UBP.

Golden anchor

Bonds are no longer the core of this redrawn portfolio approach, indeed neither are equities. More and more chief investment officers are now convinced, as is Villamin, that gold rather than bonds should sit as the anchor asset to inflation-adjusted wealth preservation. Diversification away from the Mag 7 is also highly desirable.

“US-China AI competition, resource nationalism, and secular weakness in the US dollar should pull investors beyond American shores as they seek investment opportunities,” believes Villamin.

The US dollar’s vulnerability and impact on portfolios is a common theme among wealth managers, many of whom increasingly mention this valid role for gold in portfolio construction, despite recently wild price fluctuations.

Some, including Pictet’s Sundstrom, go further still, claiming the shifting global economic framework is giving rise to an emerging financial era “marked by fiscal dominance and the debasement of money”.

Not only are these forces driven by market concerns about sustainability of US public finances, but she fears governments will “meddle with institutions and raise questions about the credibility of economic data and the true rate of inflation”.

The Pictet belief is that this confluence of forces will erode the value of money — as witnessed in the US dollar’s decline — and increase the value of “real assets” including precious metals, mining assets, real estate and infrastructure. “Their intrinsic value provides a more stable alternative to assets that governments can print,” says Sundstrom.

Dollar ‘weaponisation’

Central banks — the Chinese in particular — have started to hold large gold positions, fearing secondary sanctions in western bond markets, following confiscation of Russia’s foreign currency reserves in what Daniel Casali, chief investment strategist at Evelyn Partners, calls “weaponisation” of the dollar after Moscow’s invasion of Ukraine in February 2022.

“In the long game, which is what China is looking at, I think the renminbi backed by gold might be an alternative to the US dollar,” he says, because the Chinese are currently “totally beholden to the dollar financial system. The US could cut them off it they really wanted to.”

Some economists are even calling for a return to the “gold standard”, existing until 1971, pegging each country’s paper currency to a specific gold price.

In the long game, which is what China is looking at, I think the renminbi backed by gold might be an alternative to the US dollar

Daniel Casali, Evelyn Partners

The gold standard arrived by accident, when renowned physicist and astronomer Sir Isaac Newton, working as the early 18th century master of the Royal Mint, miscalculated the silver/gold exchange rate, causing silver coins to exit the monetary system, leaving gold as the accepted standard currency.

By this time, Newton had already published his foundational laws of motion. The third of these — stating that every action in nature provokes an “equal and opposite reaction” — has been successfully applied to both international relations and finance by scholars.

For those looking to carefully grow assets, negotiating crises, volatility and minimise risk, the “Newton Doctrine” may be one of the better ones to follow.