LT Views Winter-2025-SINGLE-build08 - Flipbook - Page 10
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INVESTING IN A FRAGMENTING
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Over the last 40 years, the world’s economies, cultures, and populations have
become more interconnected due to increased trade, technology, and investment
across different countries. This globalisation led to a lengthy period of low inflation
and lower interest rates.
We are now living in a fragmenting world
where wars, rising political tensions and
clashes over supply chains have all helped
drive a shift away from globalisation. This
is demonstrated by the new ‘gold rush’. In
the last 10 years, China and Russia have
increased their gold reserves significantly as
both countries look to reduce their reliance
on western financial systems.
De-globalisation is leading to a more
divided, polarised world with higher
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LIONTRUST VIEWS – WINTER
inflation and higher interest rates. However,
from an investment perspective, it is also
an environment where active management
comes into its own.
Increased volatility
In this more fragmented world, central
banks and governments will find it harder
to support the financial system. This means
markets may be volatile for longer during
times of stress, which requires a more
patient approach to investing.
It also becomes important to focus on
the facts. For example, on 5 August
2024, the VIX Volatility Index (VIX), which
measures expected future volatility, spiked
because of technical factors. However,
despite the different causes, media
headlines compared it to the market
volatility during the early stages of the
Covid pandemic, which was caused by
deeper challenges, such as the economic
impact of lockdowns.
