The Liberal World Order Is Dying—What Does That Mean for Your Money?

For 30 years, the rules of the global economic game seemed set in stone. Free trade, open markets, and democratic capitalism weren't just ideals—they were the operating system of the world economy. But that system is now experiencing what the Financial Times calls a terminal crash.

The newspaper's recent editorial declaring that "liberals should mourn the passing world" isn't just political commentary. It's an economic obituary for the framework that made globalization possible—and a warning shot for anyone with money in the markets.

The Golden Age Ends

Since the Soviet Union's collapse in 1991, the world seemed to be converging on a single model: liberal democracy paired with free-market capitalism. The World Trade Organization launched, NAFTA expanded trade, and even China appeared to be liberalizing as it joined the global economy.

Investors loved this world. Predictable rules meant predictable returns. Supply chains stretched across continents, companies went global, and capital flowed freely. The S&P 500 returned an average of 10% annually during this era, partly because businesses could operate in an increasingly borderless world.

But 2016 marked the turning point. Brexit and Trump's election weren't just political upheavals—they were rejections of the liberal order itself. The 2018 U.S.-China trade war, Russia's invasion of Ukraine, and the recent wave of industrial policy across major economies have shattered the old consensus.

Winners and Losers in the New Game

Who benefits from this shift? Paradoxically, it's governments and domestic champions—not the multinational corporations that thrived under globalization.

The Biden Administration's$369 billionInflation Reduction Act explicitly favors American-made products. China's semiconductor strategy aims to achieve 70% self-sufficiency by 2025. The EU'sGreen Deal prioritizes European suppliers. Every major economy is now practicing some form of economic nationalism.

Meanwhile, global companies face an impossible choice: diversify everywhere and lose efficiency, or pick sides and lose markets. Apple manufactures in China but faces pressure to move production to India. Tesla built a Shanghai gigafactory but now needs American factories to qualify for tax credits.

The New Investment Reality

For investors, this shift creates both risks and opportunities that didn't exist in the liberal era. Geopolitical risk is no longer a footnote in annual reports—it's driving daily stock movements.

Consider the semiconductor sector. NVIDIA's stock price now moves as much on export license news as on earnings reports. ASML, the Dutch chip equipment maker, saw its stock tumble 12% in a single day after new China export restrictions. These aren't companies with obvious geopolitical exposure, yet they're at the mercy of government decisions.

The defense sector, meanwhile, is experiencing a renaissance. Global military spending hit $2.4 trillion in 2023, the highest since the Cold War. Defense contractors like Lockheed Martin and Raytheon are booking orders years in advance.

Redefining Diversification

Traditional portfolio theory assumed that geographic diversification reduced risk. But what happens when geography becomes the primary source of risk?

Investors who thought they were diversified by holding Russian assets learned this lesson the hard way in 2022. Overnight, billions in investments became worthless not because of company fundamentals, but because of geopolitical decisions made in Moscow and Washington.

The new diversification playbook requires thinking about supply chains, not just sectors. A renewable energy fund might seem environmentally sound, but if it's heavily exposed to Chinese solar panels, it's really a bet on U.S.-China relations.

The Fragmentation Trade

Some investors are already positioning for a "fragmented world" scenario. They're betting on companies that can operate in multiple, separate economic blocs—or that benefit from the inefficiencies of a divided global economy.

Logistics companies are seeing increased demand as supply chains become more complex. Cybersecurity firms benefit from the need to protect now-critical domestic infrastructure. Even agriculture is becoming strategic, as food security joins energy security as a national priority.