Navigating a fractured age: markets, policy, and opportunity

A world re-aligning, not retreating

At our recent breakfast briefing in London, economist Neil Shearing of Capital Economics, explored the central theme of his book The Fractured Age—a world not so much de-globalising as pulling apart, particularly along the tectonic line of the U.S.–China relationship.

He described this “fracturing” as a long-term structural shift in which nations gradually align with one camp or the other. The direction and intensity of these alignments will shape global trade, supply chains, and capital flows for years to come.

Dollar dominance endures

Despite these shifts, Neil does not expect the U.S. dollar to lose its position as the world’s anchor currency. Citing the latest Bank for International Settlements (BIS) survey, he noted that the dollar now sits on one side of 90% of global trade transactions, up from 88% three years ago, a reminder that geopolitical tension does not necessarily translate into monetary realignment.

Growth holding steady amid political strain

At the start of 2024, market commentators were sharply divided on how rising tariffs and geopolitical strain would affect global growth. Yet the year has largely delivered a steady global growth outcome: world GDP at just under 3%, a U.S. economy buoyed by the AI boom, and a softer performance from China.

Neil’s team at Capital Economics had expected a “muddling through” in 2025, and this is exactly what has happened. The world economy continues to advance through the friction of transition rather than the shock of disruption.

Rethinking rate expectations

On monetary policy, Neil sees market expectations for U.S. rate cuts as overly optimistic, leaning instead toward only two or three 25 basis point (bp) moves. Neil’s forecast is more conservative than many market-implied expectations. Whereas markets seem to be pricing in perhaps three or more 25 bp cuts (i.e., ~75 bp or more), Neil is leaning toward two or three cuts (~50–75 bp total). He emphasised that while multiple risks exist, political noise rather than economic weakness is likely to drive volatility through 2025. He emphasised that while multiple risks exist, political noise rather than economic weakness is likely to drive volatility through 2025.

Fiscal balancing in the U.K.

Turning to the U.K., Neil highlighted the challenge facing Chancellor Reeves: to create £35–40bn in spending capacity to demonstrate fiscal prudence to bond markets. U.K. consumers remain in “OK” shape, with fading one-off inflationary pressures offering some relief and GDP growth of around 1% expected next year.

This environment, in Neil’s view, gives the Bank of England scope for four 25bp rate cuts, a more assertive path than markets currently anticipate.

Volatility ahead: political, not structural

In a world defined by geopolitical fracturing, uncertain policy paths, and noisy political backdrops, Neil’s remarks underscored a simple truth: markets will remain volatile, and the range of plausible outcomes is unusually wide.

Clarity and discipline in a fractured age

That is precisely why disciplined hedging and strategic risk advisory matter more than ever. Helping clients navigate shifting rate expectations, currency realignments, and politically driven market swings isn’t just valuable, it’s essential in this fractured age.

At Chatham, we partner with clients to turn complexity into clarity, helping them move with confidence through an uncertain world.