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27 June 2025

Home / White Papers 2025

Rethinking equity diversification in an era of geoeconomic fragmentation risks

In 2022, we identified three secular forces with potential to drive profound transformations within the macroeconomic and investment backdrops: debt accumulation, decarbonisation, and deglobalisation.

Since President Trump’s re-election, and particularly following his self-declared ‘Liberation Day’ tariff announcements on 2 April 2025, the tangible consequences of deglobalisation have become more evident. We have therefore established a framework to assess potential medium-term scenario outcomes associated with this shift and their implications. In our view, we are witnessing fragmentation of the global economic, technological and security orders, and expect this to impact international capital flows. This could justify more geographically diversified equity positioning.

This paper explores the rationale for a EUR-based investor rebalancing their portfolio away from a US-centric capitalisation-weighted approach. It underscores the fact that this could enhance portfolio resilience within regimes characterised by elevated geopolitical and geoeconomic uncertainty. However, it also affirms that there are trade-offs to consider when reducing US exposure.

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