Recent market relief following the Trump administration’s tariff pause may have given the impression that we're returning to business as usual. Insights from Economist Andrew Hunt supports a deeper shift is underway — one that won’t be reversed by short-term policy moves.
We’re entering a new economic era, marked by rising inflation pressures, geopolitical fragmentation, and reduced trust in the institutions that underpinned decades of globalisation and free-flowing capital. The 40-year Rubin-Summers-Greenspan-Bernanke (RSGB) era — defined by deregulation, falling inflation, and expanding financial markets — is giving way to a more fractured, inflation-prone, and policy-constrained environment.
The toothpaste is out of the tube and it’s not going back in. Investors now need to adapt to a world of higher real yields, greater dispersion, and more selective opportunities.
What’s Changing in the New Regime?
1. The End of Trust as Currency
The old regime relied on a high degree of trust, in stable currencies, international law, and rational policymaking. That trust has been challenged by geopolitical tensions, protectionism, and the weaponisation of financial systems. Cross-border capital flows are reversing, and nations with stronger balance sheets — like Japan and Germany — are increasingly being rewarded over deficit-heavy economies like the U.S.
2. The Inflation vs. Austerity Dilemma
The U.S. is running persistent deficits without the domestic savings or foreign capital needed to fund them easily. The Federal Reserve's limited appetite for intervention suggests a tilt towards inflationary policies as the path of least resistance. The likely outcomes — higher taxes, spending cuts, or renewed money printing — all point to sustained inflation risk. While inflation may ebb in the short term, structural pressures remain.
3. Higher Real Yields Are Here to Stay
Shrinking foreign appetite for U.S. Treasuries and growing political uncertainty make a return to ultra-low rates unlikely. This puts pressure on long-duration assets and expensive growth stocks, particularly in the U.S. market.
Tactical Positioning in a New Regime
The Longer-Term Playbook: Investing in the New Normal
Embracing the Inevitable
The RSGB era’s collapse was inevitable. Years of zero-interest-rate policies and financial engineering masked structural flaws—from income inequality to overleveraged balance sheets. While Trump’s tariff theatrics accelerate the reckoning, they merely underscore a broader truth: the world is recalibrating toward multipolarity, fiscal realism, and higher risk premiums.
For investors, this demands a return to first principles—valuation discipline, geographic diversification, and scenario planning. Our focus remains on:
- Building portfolios that are resilient to inflation, volatility, and policy uncertainty
- Taking advantage of long-term structural shifts in global capital flows and market leadership
- Avoiding overexposure to crowded trades and conventional assumptions that no longer hold.
This article has been prepared by InvestSense Pty Ltd ABN 31 601 876 528 on behalf of Primestock Securities Ltd. The information contained in this report is obtained from various sources deemed to be reliable. No representation or warranty is made concerning the accuracy of any data contained in this document and should not be relied upon as such.
