At a London media event this week, experts at Boston-headquartered Wellington Management, a large investment manager, discussed the dramatic shift in the geopolitical landscape and how it is affecting global markets.

“We are in the most chaotic, geopolitical environment that anyone has had to deal with,” Thomas Mucha, geopolitical strategist at Wellington Management, said at a media event in London this week

“There has been a shift away from economic resilience toward national security resilience, as a result of geopolitics,” he continued. “Climate change is another issue having a significant impact globally, particularly, for instance, in the tropics, South America, with water scarcity concerns.”

However, investment opportunities can be found in this changing geopolitical environment. “There are winners and losers,” Mucha said. “Defense spending is at a record high and it will continue.”

Germany and the EU recently hiked defense spending, as a result of geopolitical tensions. Mucha said that former US President Joe Biden and President Donald Trump had both been pushing the EU for some time to boost defense spending, which is now happening, sparked by the war between Russia and Ukraine.

A number of investment managers, such as BNP Paribas Asset Management and WisdomTree, have been launching defense-focused funds recently. “Defense and security are underrepresented in many portfolios and have faced decades of underinvestment in Europe, resulting in a significant capability gap. A structural shift is underway in Europe as nations increase defense budgets to meet NATO targets and respond to geopolitical challenges,” Pierre Debru, head of research, Europe at WisdomTree, said in a note. (The increasing noise around geopolitics also affects how wealth managers should think about the topic in general, as this publication explored here.)

“Artificial intelligence is also important to the shifting landscape,” Mucha continued. “It is important, for instance, in national security, for use in cyber security. Cyber attacks are one of the biggest risks. There are increasing investment opportunities in cyber security and cyber defense.”

“Climate resilience as a theme is also important,” Mucha said. In this respect, renewable energy is also important. China is leading the way on renewables, notably in solar, batteries, and electric vehicles. While China still relies on fossil fuels, it produces more than 80 per cent of all solar photovoltaic panels, half of the world’s leading electric vehicles and a third of its wind power. Meanwhile, Trump reiterates “drill baby drill.” However, Mucha emphasized that a number of US states – California for instance – and the private sector remain focused on renewables. Sixty-six per cent of California's power, for example, came from renewables in 2023. “The US wouldn’t want to give China that power and see it taking control of renewables,” he added.  Demand is also rising for copper, silver and tin needed for artificial intelligence, tech and renewables.

On asset allocation, Amar Reganti, credit strategist at Wellington Management, said there has been a substantive shift toward emerging market debt and emerging market equities, as well as a move toward private markets and hedge funds.

He is not alone in his views. A number of investment managers are positive about emerging markets this year. Paris-based asset manager Carmignac, for instance, recently said that emerging market equities, notably tech, remain undervalued compared with the US. The firm, which is overweight in emerging markets, believes that their outperformance of developed markets will continue in 2026. Benjamin Melman, global chief investment officer at Paris-headquartered Edmond de Rothschild Asset Management is also increasing his exposure to emerging markets. After lagging for several years, Melman believes that these stocks stand to benefit as investors reposition their portfolios away from the US – now that the AI cycle has reached maturity – and seek out new AI-related stocks. See more coverage here and here.