Geopolitical Developments: Non-Alignment Is Not Just Vapid Moralizing But Consequential In Destroying Global GDP

The binary characterization of Eurasian autocrats as malevolent warriors is not only true but useful in galvanizing unity to reset the global order. But under leaders like Biden this characterizing is self-defeating and only spurs support for disunity or non-alignment. The bear market rally currently underway is only one geopolitical event from cracking, and I see that such an event or the fear of it as taking the markets down as summer draws to a close. The volatility risk premium is pointing to a range-bound market over the next few days, while my technical reading of key stocks in the S&P 500 is short-term bullish and intermediate-term bearish. There is one negative factor across global asset classes. The US yield curve is bear flattening and growing more inverted. Expect the S&P 500 to rise modestly over the next few days before consolidating.

Nancy Pelosi’s trip was an act of personal courage and a statement of geopolitical weight, but the newsflow suggests she has made both geopolitics and trade more complicated. The root cause of this is American’s profound trouble uniting ASEAN, East Asia, Europe and Latin America against Eurasian autocracy. America is too contradictory for the world to believe its politicians, while Eurasian autocrats offer a simpler perspective that makes them worth engaging with, despite their malevolence.

ASEAN needs to unite not just to counter China but to stop the horrors in Myanmar. Key is making an ally of India, which is set to become more populous than China and whose ancient heritage profoundly influenced all of Southeast Asia. But even under right-wing Modi India is playing the non-alignment card, frustrating America in standing up for liberty against autocrats.

The non-aligned movement is alive and well since the other asian behemoth is also playing both sides. Indonesia has no profound need for weapons like India does, and clearly suffers from Russian and Chinese malevolence, yet even its liberal leader Jokowi countered the US in legitimizing the Putin regime. The fundamental issue is that Americans don’t unite on liberalism, so our policies and exhortations are characterized as megaphone diplomacy rather than moral expression. East Asia forum notes “Indonesia does not view the United States as a benign power. Secessionist rebels supported by the United States in the 1950s threatened Indonesia’s territorial integrity. US demands for Indonesia to follow poorly designed International Monetary Fund policies during the Asian Financial Crisis only deepened the crisis. After the post-referendum violence in East Timor, the United States imposed a military embargo on Indonesia, criticised its actions through megaphone diplomacy and mobilised international condemnation against Jakarta in the United Nations (UN). This coercive policy contains similar elements to the current Western policy directed toward Russia.”

Solving this geopolitical puzzle means Americans uniting on the value of individualism over collectivism and statism, and so offering the world a liberal system that counters the historical ethic that “might makes right.” For this to happen Americans need to define individualism in coherent English, and I contend that individualism is the quality of one’s self-expression, not a right or an assumed state of being. People are low individualists by nature but can become high individualists by focusing on the virtue of self-expression. Were Americans to embrace the quality rather than the right of individualism, we would see behavior change toward prioritizing both rich verbal speech but also shrewdness. The qualities of verbal speech and shrewdness are precisely what we Americans need to solve our domestic social problems and to reset the geopolitical order toward an ascendancy of individualistic liberalism.

A nation of well-expressed and shrewd people would command respect and put an end to the non-aligned movement. This is critical since that movement achieved nothing, and was central to the repressive governments that violently and bureaucratically stifled their populations, only to change their tunes once balance of payments crises necessitated pleas for IMF support and ensuing economic liberalism. America needs to stand for cultural liberalism as much if not more than economic liberalism, and that is within our grasp since it starts at the individual level, not the collective.

Countering Chinese and Russian aggression is critical to the world economy at present, as financial markets make clear. A weak and potentially recessionary China knocks out global GDP and reduces wealth, while a strong Russia spurs commodity inflation and food shortages. I see little change to the geopolitical calculus in the intermediate term, and so remain bearish as much lower valuations are necessary to compensate for the risks of a global recession.

My current positions are a moderate but relatively large cash position, Goldman Sachs (GS), 3M (MMM), Pfizer (PFE), Starbucks (SBUX), Titan Machinery (TITN) and the levered ETFs UPRO and SPXU.