Four Paths for a Multipolar World
The scenario outlook 2025-2026 captures the uncertainty of a world in flux. The rise of China, strain on U.S. alliances, and competition over critical technologies shape possible futures. Four distinct paths frame how geopolitics and markets may evolve, each with clear implications for investors and the Core Investment Hypotheses.
Scenario 1: Peaceful Transition (50% likelihood)
Competition remains tense but managed. Both Washington and Beijing avoid direct war, knowing the economic costs. China achieves “good enough” chip independence by 2026, expands exports of EVs and renewables, and links some trade to the yuan. Europe raises defense spending, creating spillovers into tech. India plays both sides, drawing supply chains and stabilizing markets. For investors, this scenario reflects a slow shift to multipolarity with relative stability.
Scenario 2: Engineered Crisis (20% likelihood)
U.S. domestic politics spark confrontation. Facing mid-term losses, Washington escalates patrols in the South China Sea, arms Taiwan, and pressures Panama, provoking Beijing. A naval standoff or Canal crisis by late 2026 triggers sanctions, cyberattacks, and shipping disruption. Defense stocks surge, gold spikes, and volatility grips markets. Europe and India try to hedge, but investors face extreme uncertainty. This scenario highlights asymmetric risks and crisis-driven spikes.
Scenario 3: Cold War 2.0 (30% likelihood)
Entrenched hostility sets in without direct conflict. Tech ecosystems split into dual blocs, with parallel supply chains and trade flows. The U.S. dollar remains dominant, but yuan usage grows in energy and infrastructure. Defense spending rises steadily, while India emerges as a swing power hedging between blocs. For investors, Cold War 2.0 offers visibility in defense and commodities but with persistent geopolitical overhang.
Scenario 4: Decline and Fall of the USA (30% likelihood)
Domestic fracture and constitutional crisis undermine U.S. global leadership. A government shutdown in 2025 leads to emergency powers and unrest. By late 2026, China blockades Taiwan and achieves re-unification without war. Russia pushes NATO boundaries, and BRICS/SCO expand influence. U.S. Treasuries lose safe-haven status, RMB trade flows accelerate, and agriculture exports collapse. Allies diversify away from Washington’s security guarantees. For investors, this scenario signals structural de-dollarisation, a stronger RMB, and historic shifts in capital flows.
Conclusion
The scenario outlook 2025-2026 highlights four divergent futures. Each path has distinct implications for defense, tech, resources, gold, and currency strategy. Investors should prepare resilient portfolios aligned with Core Investment Hypotheses to navigate turbulence in a multipolar world.