Bi-Weekly Geopolitical Report – U.S. Intelligence Sharing as a Tool of International Relations (April 17, 2023)
Patrick Fearon-Hernandez, CFA | PDF
Why should investors care about international relations? Why should they pay attention as great powers jostle for influence and dominance across the globe? One simple answer is that the global economy tends to grow better when there is one dominant country or “hegemon” that provides security, order, effective instruments for trade and investment, and perhaps even a common culture or set of values. Since World War II, investors have benefited from relatively fast and stable economic growth as the United States provided those public goods in its role as the world’s “Benevolent Hegemon.” Investors in the U.S. have enjoyed especially strong, risk-adjusted returns.
But as we’ve written before, the military, economic, and social costs of hegemony have now given the U.S. pause. Whether the U.S. ultimately abandons its role as hegemon, and how fast it might do so, will have major implications for investors. In this report, we look at one way U.S. officials today are trying to maintain their influence on other countries without the big economic costs they’ve accepted in the past. As always, we will also examine the investment ramifications of that strategy.