<\/p>\n
Views and opinions about a new world order in which the US and its military might play a lesser role have been around for years, if not a decade.<\/p>\n
Lately, these forecasts are being backed by in-depth research and voiced by people worth listening to.<\/p>\n
The reality is that the US is in worse shape than it was several decades ago.\u00a0A gradual shift away from dollar-based trade has gained momentum, US Treasury bonds are no longer seen as the world\u2019s safest investment, and the war in Iran has dented the belief that the US is the ultimate military power.<\/p>\n
Read:<\/p>\n
Oil steady as US-China summit begins with Iran war at impasse
\nThe new superpower test: Who is trusted when fear rises?<\/p>\n
Malcolm Charles, portfolio manager at global asset manager Ninety One, unpacked this new world scenario at the recent Old Mutual \u2018Investival 2026\u2019 investment conference, backing his argument with research and analysis.<\/p>\n
He says the US, under President Donald Trump, has miscalculated the impact of the war in the Middle East, with events unfolding very differently from what had been envisaged.<\/p>\n
\u201cWhat Trump has done to the world, I think, we will pay for for generations to come. This four-day war that he started six-and-a-half months ago really has been a complete miscalculation and disaster.<\/p>\n
\u201cIt is going to be so damaging because it\u2019s not just him and Iran fighting, there are many other parties involved and so many countries that unfortunately have had their trajectory shifted.<\/p>\n
\u201cI honestly can\u2019t see how that trajectory can come back again.\u201d<\/p>\n
Research, not opinion<\/p>\n
Charles noted that the views he shared with guests at the conference are based on research conducted by the Ninety One team.<\/p>\n
\u201cFirst and foremost, Trump is getting to a quite desperate stage to finish this war. There are three elements that could force his hand, or three 3 Ms: munitions, midterms, and markets.<\/p>\n
\u201cUntil recently, the markets were not a big worry as the AI bubble disguised any effect that the oil price had on other markets. The huge surge in [equities] that Trump is going on about removed the worries.<\/p>\n
\u201cThe bond market, however, has changed its mind and has caused quite a bit of panic in the White House. No one was focusing on the $40 trillion debt that the US has.<\/p>\n
\u201cIt was mentioned, but it wasn\u2019t the focus. Now, it is everyone\u2019s focus.<\/p>\n
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\u201cThey are going to pay $1 trillion in interest this year, more than their defence spending. It\u2019s quite a scary number.\u201d<\/p>\n
Charles adds that the world is watching US markets, US debt and the trajectory of the dollar closely.<\/p>\n
The midterm elections are another worry, given the sharp decline in Trump\u2019s popularity and the impact of the war on inflation and energy costs.<\/p>\n
Ammunition pressures<\/p>\n
Charles says shortages of military hardware and ammunition needed to prolong the war in Iran are growing problems.<\/p>\n
Read: US to spend billions to power army bases with nuclear reactors<\/p>\n
\u201cThe US spent most of their defence missiles. Now they\u2019re only playing with drones. There are no real major strikes.<\/p>\n
\u201cThere is no quick turnaround,\u201d he says, adding that US factories cannot produce air-defence missiles fast enough.<\/p>\n
\u201cIf they produce missiles for the next two years \u2013 and keep every single missile \u2013 they will have less than before the war started.\u201d<\/p>\n
\u201cTo me, the sad part is the other parties involved. The Gulf states are probably the worst affected of all. People don\u2019t actually think about second-order things. They only think Iran and America must finish this thing.<\/p>\n
\u201cThe Gulf States have changed. Their entire world has changed. They attracted the best of the best and the brightest people. They had the best airline hubs.<\/p>\n
\u201cEverything was working fantastically well, whether it\u2019s Dubai or Abu Dhabi,\u201d says Charles.<\/p>\n
Read: South Africa taps Gulf know-how for $9.5bn property plan<\/p>\n
\u201cIt really was a hub of investment, replaced by uncertainty,\u201d he adds, recounting a story of Ninety One employees running to shelters when air-raid sirens blared in these rich and once-peaceful countries.<\/p>\n
Tolling the Strait of Hormuz<\/p>\n
Charles says there is a risk that Iran could emerge as a much more powerful force in the Middle East, creating further fear and uncertainty across the region.<\/p>\n
\u201cIran has never really got on very well with the rest.\u201d<\/p>\n
Moves by Iran to monetise the Strait of Hormuz by introducing a toll on oil tankers could further shift the balance of power in the region.<\/p>\n
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\u201cWhat they are going to do is the same as the Suez Canal and the Panama Canal. You will have to pay a toll to go through.<\/p>\n
\u201cWe estimate that if you put a dollar on every barrel of oil that goes through, they will collect a couple hundred billion dollars a year.<\/p>\n
\u201cIran will become the richest state in the Middle East by a country mile,\u201d he says.<\/p>\n
\u201cUnfortunately, in the past, what have they done with the money? They haven\u2019t exactly spread it amongst their people. They will become a military might again.<\/p>\n
\u201cIsrael can\u2019t afford that, the Gulf states can\u2019t afford that, and America certainly can\u2019t.\u201d<\/p>\n
But it\u2019s already happening. Charles says Iran and Oman are in talks.<\/p>\n
\u201cThey were meant to have a meeting [on Tuesday] with the Gulf states about how they were going to do it [apply the toll], but the meeting was cancelled.\u201d<\/p>\n
Power shifts<\/p>\n
The geopolitical shifts are far-reaching, with Russia, China and emerging markets among those benefitting.<\/p>\n
\u201cRussia is benefitting from the changes in the war in Ukraine. You would have noticed that there are many, many more attacks on Ukraine soil now, because all those defence missiles that were going to Ukraine aren\u2019t going [there] any more.<\/p>\n
\u201cWhen Russia attacks now, quite a few more are getting through because America is distracted. Ukraine is actually in a bit of a pickle,\u201d says Charles.<\/p>\n
Read:
Markets can handle a hawkish Fed, not uncertainty
Who pays when a country runs out of options?
Donald Trump has made $2.2bn in his second term<\/p>\n
Ninety One concludes that China stands to benefit the most from the upheaval.<\/p>\n
\u201cI think China will come out of this on top. China, bizarrely, is the adult in the room. They have quietly just done the right thing.<\/p>\n
\u201cNumber one, they stockpiled millions and millions of barrels of oil before the war, so they didn\u2019t have to panic when the Strait of Hormuz was closed,\u201d says Charles.<\/p>\n
\u201cThe other way China benefits is in the export of solar panels, increasing by a quarter. They\u2019ve exported an extra $25 billion of solar panels and batteries to Africa and Asia every single month in the last six months. They just play both sides and gain.<\/p>\n
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Read:\u00a0The world crossed a major solar milestone \u2013 no one noticed<\/p>\n
\u201cChina is playing diplomatically and staying out. But, when they decide the war\u2019s over, they will step into Iran and say \u2018enough now\u2019.<\/p>\n
\u201cChina will be seen as a peacemaker, almost as a global world leader,\u201d says Charles.<\/p>\n
\u201cThis is how superpowers evolve.\u201d<\/p>\n
Currencies<\/p>\n
On top of it all, the world is realising that it is overexposed to the US dollar.<\/p>\n
\u201cGulf states and all those sovereign wealth funds have realised that their biggest mistake over the last 10 years was that they were all overexposed to the US.<\/p>\n
\u201cThey want to trim down their dollar holdings. And we are having the exact same conversations with the big endowment funds in America,\u201d he says.<\/p>\n
Then comes the good news for South Africa. \u201cAsk yourself why emerging-market currencies have done so well,\u201d says Charles.<\/p>\n
\u201cThese guys are slowly starting to trickle into emerging markets. The best-performing asset class over the last 18 months has been EMFX [emerging-market foreign exchange].<\/p>\n
\u201cIt is for good reason. We [emerging-markets] listened to the International Monetary Fund, the World Bank and the Washington Consensus, and all of us have got our budget deficits under control.<\/p>\n
\u201cWe are doing the right thing, whereas all the developed markets have done the exact opposite. US debt is at 125% of GDP, and the UK has gone from 80% to 95%.<\/p>\n
\u201cThey are all just running up their debt and spending like crazy, becoming less sustainable going forward,\u201d says Charles.<\/p>\n
\u201cInvestors are saying they don\u2019t want to be part of that any more.\u201d<\/p>\n
#losing #grip #global #power<\/p>\n","protected":false},"excerpt":{"rendered":"
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