Nicholas Mitsakos

The convergence of volatile geopolitics fragmented and unpredictable markets, disruptive technologies, and unique opportunities.

Understanding geopolitical issues, developing innovative and insightful investment strategies, and navigating political and economic volatility are now essential to achieving investment success.

Geographies

The first step is to consider geographies. Some regions and countries and specific industries within them will disproportionately benefit, such as technology-focused companies in Japan, defense-focused companies in Germany and France, and technology-focused companies in the United States.

Technology

Technology is now closely tied to geopolitics and is directly influenced by it. Therefore, localized technology opportunities hedge this risk. Technology companies in Taiwan that can also benefit from relationships in the United States are a primary example.  AI-related companies in the United States can be applied to the defense industry. We are seeing the emergence of a West Coast aeronautical and space engineering hub focused on defense and space technology.

Silos

Essentially, investing in geopolitics thinks of individual silos of geographies and industries that can disproportionately benefit because the world is becoming more fragmented, risky, and technology dependent. On top of that, interactions among some of the silos can be beneficial, such as between Taiwan and the US, the US and Europe, India and the US, Southeast Asia, the US and Taiwan, etc.

Risk Management

Risk management is even more essential, and it means diversification among opportunities within each “silo” as well as allocating to liquid investors that hedge markets and understand we are also in an environment of more intense and frequent volatility. Opportunities are emerging and need to be tested, but this is how we approach the investment landscape.

Fragmented, Interconnected, and Complicated

I use the term “silos” because that was not the way investment strategies were developed a short time ago. As an investor, you would consider the global market completely accessible. That is no longer the case. We regarded free trade as a given and did not consider tariffs, especially extreme and volatile tariff policies. Markets were correlated, and most holdings were indexed, moving predictably.

It’s Geopolitics and Economics

Economics and the health of local economies determined investment strategies. Economics is not the only, nor the most critical, component. It involves geopolitical policy, which encompasses fluctuating tariffs, trade restrictions, technology limitations, and defense budgets, among other factors.

This encourages more localized thinking and the incorporation of policy as part of an economic and investment strategy. European defense companies were not considered an attractive opportunity 12 months ago, but geopolitical developments have changed that. An aluminum or steel company in the United States was too costly and inefficient, but that may have changed overnight. Technology companies in Taiwan must select allies and navigate China’s geopolitical and economic landscape while maintaining a global ecosystem. This web of complexity was not a layer that impacted investment decisions a short time ago. Now, it can undermine the value of any investment.

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