[REPLAY] Louis-Vincent Gave – Macro Consequences of Government Sanctions (Capital Allocators, EP.247) | Capital Allocators – Inside the Institutional Investment Industry | Podwise
This episode explores the potential second-order impacts of Western government responses to Russia's invasion of Ukraine, particularly focusing on the financial and geopolitical ramifications. Against the backdrop of the freezing of Russian central bank reserves and the seizing of oligarch assets, Louis-Vincent Gave, founding partner of GaveKal, argues that this sets a dangerous precedent, potentially undermining the rule of law and the safety of assets held in Western countries. More significantly, this could lead emerging markets to reconsider their reliance on US Treasuries and the dollar, potentially triggering a massive shift in global capital flows and impacting inflation in the West. For instance, the recent fall in Chinese bond yields below US bond yields is cited as evidence of this shift. As the discussion pivoted to energy prices, Gave highlighted the pre-existing energy crisis exacerbated by the war, emphasizing the devastating consequences for Europe while contrasting it with the potential benefits for energy-producing regions in the US and China's strategic adaptation. In closing, Gave identifies opportunities in undervalued assets like energy, materials, and emerging markets, suggesting a shift from momentum and carry trades to a "return to the mean" investment strategy. This means for investors a need to adapt to a new era of uncertainty and consider alternative asset classes, while for global geopolitics, a potential restructuring of financial centers and power dynamics is on the horizon.
