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Rethinking stability: investing in a multipolar world
key takeaways.
The post-Cold War unipolar order is long gone – the tussle between the US and China is coming to define our age
Trade relationships are reshaping – goods and commodities are now travelling along shorter geopolitical lines
Fearing weakening US defence commitment and an increasingly muscular China, Asian nations are building a web of bilateral security ties
Artificial intelligence has become a new frontier of international competition – this is driving new economic growth across Asia
In a multipolar world of unpredictable trade policies, geopolitical tensions, and evolving alliances, investors should take an active approach, seeking out the opportunities arising as nations invest to build domestic security.
The date is 1 January 2000.
Though a new millennium has dawned, little has changed – the world is a place of certainty.
US economic and military might has created a unipolar world. Liberal democracy is advancing. International institutions – such as NATO and the World Trade Organization – are expanding and strengthening. Globalisation and trade interconnections are also accelerating, making wealthy nations wealthier and lifting millions of the world’s poorest people out of extreme poverty. Asian nations are well-established as significant exporters, but there is no doubt that the West is in the geopolitical ascendancy, and little sign this is about to change.
Today, this world is upside down.
Watch our manifesto video: rethink stability
Globalisation is rapidly on the retreat as the international community fragments into new, competing blocs. This is the dawn of a multipolar age. China is now a real rival to the US – economically, geopolitically, and even technologically. In Asia, some nations are forced to choose between the two superpowers, but others are able to play both sides. More widely, democracy is no longer advancing – we are back in an age of strongmen.
We believe that portfolio resilience and long-term growth will come not from retreat, but from seeking out the myriad opportunities being created as this new world order takes shape
In times of chaos, we all crave stability. For investors, as the world seems to lose its balance, it’s only natural to slow down and dig in. At Lombard Odier, however, we find balance through movement. We believe that portfolio resilience and long-term growth will come not from retreat, but from seeking out the myriad opportunities being created as this new world order takes shape.
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Weaponised interdependence
Between March and August 2017, the shutters came down on 74 out of 112 South Korea-headquartered ‘Lotte Mart’ supermarkets operating in China, forcibly closed for what the authorities alleged were regulatory infringements such as fire safety violations. That same year, Chinese tourist visits, which had made up almost half of all South Korean tourism, fell by 48%. Though Beijing never officially confirmed the connection, the message was clear – China was punishing South Korea for its participation in a US-led missile defence programme. The collapse in Chinese tourism cost Seoul USD 15.6 billion; the Lotte Group lost USD 1.8 billion and, by the end of 2018, had pulled out of China altogether.1
Two years later, Professors Henry Farrell and Abraham Newman gave a name to this kind of coercion. In a seminal economics paper – Weaponised Interdependence: How Global Economic Networks Shape State Coercion – they argued that complex, international economic networks, which had been traditionally assumed to foster cooperation, instead create power imbalances and tools of coercion2.
Global interdependence, once a hallmark of efficiency and economic growth, is increasingly being weaponised
These economic pressures mirror an older and simpler tool of coercion – blocking access to physical commodities. In March 2026, the world was reminded how dramatic such interventions can be when Iran effectively closed the Strait of Hormuz – a key route for oil and gas exports – catalysing a global energy crisis. The Strait of Malacca – the gateway to the South China Sea through which around 80% of China’s oil imports pass, along with around 25% of all maritime trade – has long been seen as another potential chokepoint.
Global interdependence, once a hallmark of efficiency and economic growth, is increasingly being weaponised. Reliance on international networks – whether for physical, financial, or information flows – has become a vulnerability.
Trade landscape reshapes along geopolitical lines
For governments, there is a clear imperative – build resilience at home.
To achieve this, many are turning to tariffs to protect or reinvigorate domestic industries. According to the World Trade Organization, between October 2024 and October 2025, the value of global goods imports subject to new tariffs or other restrictive measures rose more than four-fold year-on-year.3 In 2026, the trend has continued, with restrictive policies outpacing facilitative policies.4 Importantly, this rise is not confined to the world’s largest economies engaging in tit-for-tat tariffs, but is a broad-based movement that extends well beyond the G20.5
For governments, there is a clear imperative – build resilience at home
Among major powers, trade has shifted towards partners who are more aligned politically6, as governments and businesses have sought to reduce supply-chain risk. Some emerging nations, however, have taken a position of ‘strategic neutrality’ and are able to ‘play both sides’. For example, in May 2026, India – which is a founding member of the BRICS alliance alongside China7 – joined Japan, the US, and Australia in launching the Quad Critical Minerals Initiative, aiming to mobilise up to USD 20 billion to secure critical minerals supply chains outside of China.8
US unpredictability fosters web of defence alliances
This growing focus on geopolitical alignment, or ‘friend-shoring’, is not the end of the story, however. As the established order breaks down, longstanding political alliances are coming under strain.
In late summer 2026, US President Donald Trump announced the reduction of the US presence at a major planned joint defence exercise with political allies South Korea, a decision he linked, in part, to South Korea’s failure to take part in the Iran war.9 Japan, which also has a longstanding defence alliance with the US, fears it may be next to feel the impact of US ambivalence.10
For investors, these upheavals need not herald a retreat, however. Instead, new opportunities are arising as governments across Asia invest in national security, understanding that the US may not come to their aid in time of need. The scale is striking. Military spending in South-East Asia rose 15% to USD 67.1 billion in 2025, the second-fastest growth rate of any sub-region in the world.11 South Asia’s defence spend climbed 8.7% to USD 110 billion.12 In Japan, defence has already reached its highest share of GDP since 1958.13 Some of this investment is flowing into a web of new and expanded bilateral defence deals that criss-cross the region, with an eye firmly on an increasingly assertive China. Vietnam and the Philippines, for instance, have each penned large deals for the purchase of Indian missile systems. The two nations have also committed to closer defence alignment, including information sharing and joint activities at sea.14
At the same time, the Philippines has entered a Reciprocal Access Agreement with Japan – the first such deal Japan has agreed with a South-East Asian nation – expanding reciprocal troop deployments in each country. To add to the complex, evolving picture, Australia and Indonesia have also entered a common security pact that will formalise top-level information sharing and consultation, and create a framework for cooperation in the event of regional conflict.15
Across Asia, global AI investment is creating growth and new export opportunities
AI investment stimulates new growth
With artificial intelligence becoming increasingly important to the defence sector, some of this defence spend will overlap with investments in technology and digital infrastructure.
In Japan, for example, Prime Minister Takaichi has unveiled a huge, 14-year, USD 2.3 trillion public-private investment plan aiming to strengthen supply chain resilience and safeguard critical technologies, alongside boosting long-term economic growth.16 The plan will target key strategic sectors including defence, with more than a quarter of the planned investment allocated to AI and reviving Japan’s semiconductor industry.
Across Asia, global AI investment is creating growth and new export opportunities. Taiwan’s exports hit a record USD 80.2 billion in March 2026, up 62% year-on-year – a surge its Finance Ministry attributed to growing global AI demand.17 At the other end of the supply chain, Malaysia has carved out a key role as home to 13% of global semiconductor assembly, testing, and packaging. January 2026 saw a near 40% year-on-year rise in Malaysia’s broader electronics exports, underpinned by the government’s National Semiconductor Strategy.18
New global order takes shape
For investors, this growth is a clear sign that today’s uncertainties need not mean reduced investment opportunities. It is essential, however, to understand that the new geopolitical landscape has not yet settled – the map is still being redrawn.
The BRICS economic alliance, for instance, which is widely seen as a rival to the G7 and now covers 40% of global GDP19 ((including six Asian nations as either full or partner members), is continuing to explore the creation of a cross-border payments system which could reduce reliance on the US dollar for international transactions20. At the 18th BRICS summit held in India in September, the host nation pressed for a first-of-its-kind link between the bloc’s central bank digital currencies for trade settlement. Though the plan was not formally included in the summit’s joint declaration21, the discussions demonstrate emerging nations’ willingness to push for a greater role in shaping the international economic order.
And China is continuing to challenge US technology leadership. In July 2026, Beijing launched the World Artificial Intelligence Cooperation Organization (WAICO) with 29 founding member nations, as a counterpoint to the US-led Pax Silica. Shortly before the launch, Chinese firm Moonshot’s latest AI model ranked in the top three globally on a leading AI benchmark.22 With China now a credible threat to US AI dominance, there is real uncertainty over who will win the AI upper hand, and the economic and military clout that is likely to follow.
Though there will be no return to yesterday’s world, investors need not fear the world to come
Balance in an unstable world
Despite today’s many uncertainties, at Lombard Odier, we do not believe this is a time for investors to dig in. A more competitive geopolitical environment does not necessarily translate into a weaker investment backdrop, and recent geopolitical shocks have not translated into market downturns.
Across Asia-Pacific, the volume of goods exports increased by 5.3% in 2025 (well ahead of the global rate of 3.8%), despite the global proliferation of restrictive trade policies.23 Even China, which has been hit hardest by US tariffs, continues to make a strong medium-term case for select equity exposure, thanks to relatively resilient energy supplies, space for further fiscal support, and appealing valuations. This is particularly true in technology, where firms are gaining from the build-out of domestic computing power and Beijing’s drive toward technological independence. We expect Chinese earnings growth to accelerate significantly in 2026.
As the new global order takes shape, trade is finding alternative routes, political and defence relationships are re-forming, and a new capital investment cycle is being unleashed. We believe that in today’s multipolar world, long-term growth and portfolio resilience will be achieved by taking an active approach, searching out and seizing the opportunities created as governments invest to secure strategic industries and businesses invest in resilient supply chains.
Though there will be no return to yesterday’s world, investors need not fear the world to come.
This is a marketing communication issued by Bank Lombard Odier & Co Ltd (hereinafter “Lombard Odier”).
It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a marketing communication.
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