End of “peace dividend” and rise of great power competition are forcing investors to rethink portfolios
The Global Market Strategy team at New York Life Investment Management, released their annual geopolitical risk report for 2026, “Geopolitical risk in a shifting world order,” finding that a fundamental transformation in the global system is reshaping markets and challenging how investors build portfolios.
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“The resurgence of great power politics is reshaping the relationship between geopolitics and economies,” said Michael LoGalbo, Global Market Strategist, New York Life Investment Management.
The report argues that geopolitics is no longer a periodic source of volatility, but a structural force driving economic outcomes, market behavior, and asset allocation decisions. As the era of U.S.-led globalization gives way to one defined by great power competition, economic nationalism, and strategic state intervention, investors are operating in a world where the old playbook no longer applies.
“The resurgence of great power politics is reshaping the relationship between geopolitics and economies,” said Michael LoGalbo, Global Market Strategist, New York Life Investment Management. “For investors, the message is clear: yesterday’s tools won’t manage today’s risks.”
A new market regime driven by geopolitics
The report finds that the relatively stable, low-geopolitical-risk environment of the 2010s, often referred to as the “peace dividend,” has come to an end. In its place is a more fragmented and competitive global system, where geopolitical shocks are more frequent and more likely to have lasting economic consequences.
Rather than isolated events, geopolitical developments are increasingly driving long-term market realignments, with government policy across trade, industrial strategy, and national security playing a larger role in shaping market outcomes.
Chokepoints and constant risk
As global competition intensifies, the report highlights the rising importance of economic and financial “chokepoints,” critical nodes in systems such as payments, shipping routes, technology supply chains, and energy flows. Disruptions in these areas can cascade across markets and trigger outsized volatility.
At the same time, geopolitical risk can no longer be treated as episodic. It has become a persistent feature of the investment landscape, requiring more deliberate integration into portfolio construction and risk management.
Rethinking portfolios for a new era
To navigate this shift, the report points to evolving approaches to portfolio construction, including greater emphasis on resilience, diversification, and assets that may respond differently to geopolitical shocks. It also introduces a “macro volatility” portfolio framework designed to help investors navigate periods of heightened geopolitical stress and capture how shocks transmit through markets.
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