The rules of the market may have changed. How should multi-asset investors respond?
Is fiscal policy the new force driving markets?
For many years, central banks guided markets, with interest-rate changes driving asset movements. That dynamic is now under pressure. We believe we have entered a regime of fiscal dominance where government spending and borrowing are playing a bigger role in influencing financial assets, and central banks are reacting rather than leading.
Rather than a short-term disruption, we see this as a structural shift. In this paper, we explore its implications.
Rethinking portfolio construction in a new regime
Inflation is proving stickier than expected, fiscal deficits are putting persistent pressure on bond markets, and geopolitical change is redrawing supply chains. The forces sustaining these pressures are structural, not cyclical – and they are unlikely to resolve quickly.
For multi-asset investors, the implications are significant. Relationships that have shaped portfolios for decades, including how asset classes behave under stress, may no longer hold.
We believe investors need to think differently: about where resilience comes from, about the opportunity set available to them, and about the risks that traditional allocations may leave unhedged.
Read the full paper to learn more about these evolving dynamics and how investors can navigate the path ahead.
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