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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is chief market strategist for Europe, Middle East and Africa at JPMorgan Asset Management
Many investors are baffled by the fact that markets have been so resilient to an increasingly troubled geopolitical environment. Are investors being complacent? Are they simply incapable of pricing political risk?
I would argue the resilience of returns is rational. To understand this, we have to go back to a seminal speech in 2005 by then chair of the Federal Reserve, Ben Bernanke. He argued that the world was experiencing a “global savings glut”.
In short, a number of Asian countries were either scarred from years of financial crisis and balance-of-payments turmoil in the 1990s, or seeking to depress their currencies to focus on export-driven growth. This created a glut of savings that travelled abroad, with US government bonds top of the wish list.
Bernanke highlighted that this was acting as both a blessing and curse for the US. It provided the US Treasury secretary with abundant cheap financing and so too for American households and businesses. But this cheap capital was too tempting, running the risk of overspend and bubbles in the US. Within a few years, this warning proved correct.
That wasn’t the end of the savings glut story, however. Stage two happened when key parts of Europe shifted from being net spenders to net savers after the Eurozone sovereign crisis.
The global savings glut got bigger, as did the investment flows into the US, one of the few areas of the world still happy to spend and grow. At the end of 2025, America had a negative net international investment position — the difference between US-owned foreign assets and foreign-owned US assets — of $27tn.
However, we are now transitioning to what could be termed a global savings grab. Governments and companies around the world want to spend more. In doing so, they are competing to offer the most attractive opportunities to the world’s savers.
Governments are being compelled to spend in reaction to geopolitical turmoil, prompted by a more assertive US foreign policy. In an effort to bolster security and economic resilience, nations are embarking on a wide variety of projects ranging from defence to energy infrastructure to shoring up domestic supply of critical goods and services.
Germany is a case in point. It has thrown away the shackles of the debt brake, which restricted federal budget deficits to a percentage of GDP, and embarked on a massive spending programme.
Meanwhile, companies are increasingly finding themselves in a race to beat their competitors by utilising new technologies such as AI. Investment is broadening from the big producers of these technologies in the US to businesses around the world seeking to reap the productivity rewards.
This increasing competition from governments and corporates has four important and positive implications for investors.
First, we need to recognise that a shift in spending will broaden growth and investment opportunities. For the past 15 years, the US has led the way in drawing savings from around the world, which has boosted its growth, corporate earnings and asset prices.
As that money now stays and gets deployed at home, we will see a much better dispersion of growth and earnings and so a much more internationally diversified portfolio of risk assets makes sense.
Second, investors should think carefully about the role currencies will play in total returns. When so much of the global glut of savings was headed to the US, it pushed up the value of the dollar and compounded the total gains that non-US investors made. In my view, as capital gets deployed back home in the coming decades, this will coincide with downward pressure on the dollar, which could strongly influence returns for non-US investors.
Third, with global demand for capital so much higher, investors can, and should, be discerning about how they deploy their savings. Governments seen to be focusing too much on short-term, electorate-pleasing moves will find themselves having to pay more, as will companies with chief executives engaging in passion projects rather than productivity-enhancing capital expenditure. This speaks to actively managed investments with close scrutiny of the fundamentals, particularly in fixed income.
Finally, we need to understand that the apparent disconnect between political volatility and economic resilience is rational. The risk is that global savers sit on the sidelines. We must recognise that the more uncertain the political backdrop becomes, the more investors will benefit from a bounty of returns in the coming years.
