A no-rules boxing match: Samy Chaar on competing in a fragmented world economy

The world order is being redrawn. It didn't happen overnight – it has been building for years. While many stayed complacent, the shift is now impossible to ignore. According to Samy Chaar, Lombard Odier's Chief Economist and CIO Switzerland, "the map used to be global. Now we're seeing some fragmentation within that map. Blocs are segregating. The map is changing." The question for investors is no longer whether this transformation is happening – that much is now consensus – but what it means for markets, portfolios, and the global business cycle.

Mapping the new world order

For three decades, the world ran on interdependence. China supplied cheap goods. Russia and the Middle East supplied cheap energy. America supplied security. Economies specialised, trade flows expanded at roughly 6% a year¹, and the system worked – until it didn't.

The map used to be global. Now we're seeing some fragmentation within that map. Blocs are segregating. The map is changing

"We've moved from a world that was global into a world that is now fragmenting," Samy Chaar explains. "It was difficult for some to recognise. It was difficult for the Europeans to acknowledge that the global world that they benefited from so much was now over."

The new map, as Samy Chaar sees it, has three distinct zones. There are the two competing blocs – the US and its partners (which includes Europe, Canada, Australia, and the UK) on one side; China and its strategic allies (including Russia, Iran, North Korea, parts of Africa, Southeast Asia, and Latin America) on the other. And then there is a third group of countries – like India, Indonesia, Brazil – that retain the flexibility to engage with both sides. "You could say there are three blocs," he notes, "the two blocs that are challenging one another and a bloc that can be a little bit more opportunistic."

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Crucially, Samy Chaar is clear that this is not a temporary disruption. Drawing on the historical rhythm of open and closed eras, he sees the current fragmentation as a multi-decade process, comparable in duration to the Cold War itself. "We've been in it, maybe ten years," he says. "So we certainly have a couple of decades to go through."

A no-rules boxing match

If there is one analogy that captures the nature of the US-China confrontation, it is that of a boxing ring. "It's going to run in 12 rounds," Samy Chaar says. "I don't know if we're in round number one, two, or three, but very clearly we're not at the end of the fight. There are two big heavyweights confronting one another in the ring." Both contenders are strong. Both have weaknesses. And crucially, neither is about to put down their gloves. There's a reason it's always the US in the ring, though: as Samy Chaar explains, the US is "the dominant power" – in energy, in technology, militarily – and "the dominant power wants to retain first place" against any challenger.

It's going to run in 12 round. I don't know if we're in round number one, two, or three, but very clearly we're not at the end of the fight

What makes this contest different from the era of globalisation is the absence of rules. In the previous period, economies were constrained – industrial policy was limited, trade rules were binding, and what Samy Chaar calls "economic steroids" were off the table. Today, they are not. "Steroids are allowed," he says. "You can implement industrial policy. You can finance it. You can impose tariffs. You can do whatever you want." The corollary: whatever one side does, the other will match. Restraint, in this environment, is a competitive disadvantage. "If you believe in clean sports, you're going to lose that fight."

This isn't a stance that shifts with each administration, either – it commands broad political consensus in the US, cutting across party lines. Trump formalised the confrontation with China through tariffs in 2018. Biden kept them in place and maintained a tough posture. Trump's return has only hardened the position further. "China might be the only bipartisan element that unites the Democrats and the Republicans," Samy Chaar observes. The fight, regardless of who sits in the White House, is not going away.

Shock is the new normal – but it is good for business

There is a paradox at the heart of this era that puzzles many observers: why, in a world that looks increasingly unstable, are markets at or near all-time highs? Samy Chaar's answer lies in what he calls the economic security cycle.

Going from interdependency to economic security requires a lot of investment. It's not free to secure what is strategic. You need to pay for it

When interdependence breaks down, nations must secure what was previously provided by others – energy, defence, technology, infrastructure. "Going from interdependency to economic security requires a lot of investment," he explains. "It's not free to secure what is strategic. You need to pay for it." That investment, in the form of capital expenditure (Capex), generates demand, fills corporate order books, and ultimately drives profits. "As citizens, this is not a fantastic era," Samy Chaar acknowledges. "But it's not that bad for business, because you have a lot of Capex."

The cycle has already weathered significant shocks – Covid, an oil shock triggered by the Russia-Ukraine war, a tariff shock, and a second oil shock tied to the Middle East – and has remained resilient throughout. "That Capex cycle is still sufficiently powerful to compensate for all of these headwinds," he says.

The question, then, is whether that resilience can hold. To judge that, it’s important to track three signals: the pace of new productive investment, returns on invested capital, and trends in employment and consumption – and all three remain healthy. "So far, I would say, so good. There are no red flags."

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The strategic battlegrounds: trade, technology, and energy

Beneath the macro picture, three specific arenas are shaping where the fight is actually being conducted.

Trade is reshaping rather than disappearing. Cross-bloc trade is declining, but within-bloc trade remains robust. Samy Chaar notes that even between the US and China, some exchange is likely – rare earths flowing one way, advanced semiconductors potentially flowing the other. But the era of borderless global commerce growing at that pace is over. "We're probably going to see half or a third of that in the coming decade," he says.

Technology is really at the core of the confrontation between China and the US

Technology is where the confrontation is most intense. "Technology is really at the core of the confrontation between China and the US," says Samy Chaar, drawing a direct parallel with the space race between the US and the Soviet Union. China leads on adoption – the ability to deploy and scale technology across its industrial base. The US leads on compute power, producing chips significantly more advanced than China's. "When it comes to robotics, artificial intelligence, we will need a lot of that," he notes. For investors, the Capex flowing into this technological race – on both sides – is one of the most durable drivers of the current cycle.

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Energy, meanwhile, sits at the intersection of economics and strategy. Oil remains critical, even if its relative importance is declining. The Strait of Hormuz has been a notable flashpoint. But the deeper shift is the accelerating investment in alternatives – nuclear, solar, and renewables – as economies seek to insulate themselves from the geopolitical exposure that comes with fossil fuel dependence. Japan is building six new nuclear plants. China is investing heavily in solar and nuclear. Europe, by contrast, has yet to mount a coordinated push – though Samy Chaar hopes that will change. "Energy is about oil, but clearly not only," Samy Chaar concludes.

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The green light is still on

In a fragmented world, the investment logic follows the security logic. Capital is flowing where economic transformation is most advanced – and investors should follow it.

The US has led in this cycle, with significant Capex in energy (the shale boom) and technology (the CHIPS Act, the Inflation Reduction Act). Asia – Taiwan, Korea, Japan, and China – has been a central part of the story, particularly in technology. Europe is the laggard, but Samy Chaar cautions against writing it off entirely. Germany has already moved to amend its constitution to enable greater defence and energy spending. "Being totally out of Europe would be a very harsh judgement," he says. "It's late, but it's not out of the game."

The overarching message is one of disciplined optimism. The business cycle, despite the noise, remains in good health. Capex is growing above its historical pace. Financing levels are reasonable. Profits are running strong. The read-through for investors is to stay close to where the Capex is flowing, and not mistake near-term noise for a change in the underlying cycle. "Even if it's a pale green, we still have the green light to continue to be fully invested," Samy Chaar says.

The map is being redrawn. For those positioned correctly, that is not only a challenge – it is an opportunity. As Samy Chaar puts it: "There is no going back."