For the past fifteen years, global investors have lived in the shadow of one dominant market: the United States. The S&P 500 has compounded at levels rarely seen in history, U.S. market capitalization has ballooned from $40 trillion to $70 trillion, and America now represents roughly 70% of the MSCI World Index while producing only 22% of global GDP – a divergence without precedent.
Yet according to Louis-Vincent Gave, one of the most respected independent macro thinkers of our time, the foundations of this extraordinary run are starting to crack – not because of classic recession triggers, but because of a decade and a half of capital misallocation on a historic scale.
“Energy transformed”) is Gave’s core belief about economic activity. Historically, serious bear markets and recessions have arrived when economies were hit by a combination of (1) sharply higher interest rates and (2) sharply higher energy prices.
Today neither condition is present. Interest rates remain low by any post-GFC standard, and energy prices are remarkably subdued almost everywhere. On a pure fundamental basis, the macro backdrop does not scream “imminent crash.”
The real risk, Gave argues, is different in nature: a slow-motion repricing of hundreds of billions – possibly trillions – of dollars that were deployed into unproductive or over-hyped assets during the era of near-zero rates.
“For 10–15 years we had too low a cost of capital. Capital was misallocated and now needs to be repriced.”
Crypto, private equity, private credit, and – most importantly – the entire artificial intelligence complex have sucked in capital on the promise of permanently elevated returns. Those promises are now being stress-tested, and many are failing the test.
A perfect microcosm is the recent Oracle episode: the company announced plans to spend hundreds of billions on data centers, the stock surged 20%, and then – within weeks – markets began asking the fatal question: “Where exactly is the money coming from?” Oracle’s credit spreads blew out, rapidly followed by Meta, Google, and others. The market flipped from rewarding capital expenditure announcements to punishing them almost overnight.
SoftBank in Japan has lost 40% in a matter of weeks for exactly the same reason.
We have entered the second, uglier phase of the AI capex boom: the funding phase. And the funding is turning out to be far more difficult and expensive than anyone modeled two years ago.
Gave’s answer is nuanced: “No – not a broad, 2008-style crash triggered by classic macro forces. Yes – a very painful bear market in the over-owned, over-hyped U.S.-centric growth themes (AI, crypto, private markets).”
In other words, the risk is sectoral and concentrated rather than systemic – but because those sectors became so large and so widely held (directly or indirectly), the spillover effects could still be severe.
Gold – Still a Core Hedge Despite the Run-Up The trade is undeniably crowded at $4,300/oz, but crowded does not equal wrong. Gave views gold less as an inflation hedge and more as the classic low/negative real-rate asset. With central banks almost certain to cut rates aggressively if private credit and tech capex roll over, real rates are headed lower again.
Crucially, Western institutional ownership remains surprisingly modest. Shares outstanding in major gold ETFs are still below the peaks from 2020–2021, even after the historic rally.
Non-U.S. Equities – Especially Those Exposed to Eurasian Integration The most contrarian – and potentially highest-conviction – part of Gave’s thesis is that the next decade’s growth will not be led by the United States but by the accelerating economic integration of the Eurasian landmass.
Europe, Japan, China, India, ASEAN, and even Latin America have all gone through brutal bear markets and debt purges in the 2010s and early 2020s. Many of the frauds and excesses have already been exposed and corrected. The U.S., by contrast, is only now entering that cleansing phase after a 15-year bull market.
“When the tide goes out in the U.S., we will finally see who has been swimming naked. In most of the rest of the world, the tide already went out years ago.”
China – An Unlikely Winner of the Trade War Seven years after the U.S. launched what was billed as an “easy-to-win” trade war, the scoreboard is lopsided in China’s favor. Beijing’s monthly trade surplus has quadrupled from ~$20 bn to ~$100 bn. It now exports cars, wind turbines, and nuclear reactors instead of T-shirts.
More importantly, China spent those seven painful years (stock market –66%, property –33%, birth rate halved) de-Westernizing its supply chains. The U.S. is only now waking up to the fact that it is critically dependent on China for rare earths, magnets, refining capacity, and dozens of other inputs.
The Trump-Xi summit in Seoul focused almost entirely on TikTok and rare earths – two topics where China holds almost all the leverage. Washington is being forced to choose between (a) an astronomically expensive decades-long on-shoring project at a time of 6–7% budget deficits and 120% debt-to-GDP, or (b) pragmatic coexistence. Early signs strongly suggest option (b).
Combine an administration that openly desires a weaker dollar, twin deficits at levels never seen outside of major wars, and a world that is actively building non-dollar trade and financing corridors (accelerated by the 2022 Russia sanctions shock), and the path of least resistance for the dollar is down – potentially sharply.
European equities remain historically cheap and would normally benefit from any emerging-market growth impulse. However, the coming end of the Ukraine war (likely without regime change in Moscow) will force Europe to confront an almost unmanageable political fracture: Germany, France, Italy, Hungary, and Austria will push to reopen trade with Russia; Poland, while Poland and the Baltics will refuse outright. The risk of a debilitating intra-European split is very real.
Gave’s most provocative call is that the defining growth story of the 2030s is already visible: the economic integration of Eurasia.
Russia brings the cheapest commodities on earth. China brings the cheapest machine tools and lowest cost of capital. India brings the cheapest skilled labor.
Mix them together with political will (evident from the highly symbolic Modi–Xi–Putin appearances), and you have an economic bloc that could dwarf anything the world has seen.
The era of U.S.-centric, tech-driven, dollar-funded growth financed by endless deficits and zero rates is hitting natural limits. The capital misallocation of the past 2010–2024 period is being exposed, and the adjustment will be painful for anyone overexposed to U.S. growth stocks, private markets, and dollar assets.
At the same time, an entirely different growth axis – cheaper, commodity-rich, manufacturing-heavy, and increasingly self-financing – is emerging across Eurasia.
For investors willing to look beyond the noise of daily U.S. market moves, Louis-Vincent Gave’s message is clear: the biggest risks and the biggest opportunities both lie outside the United States. The world is changing faster than most Western portfolios currently reflect.
Watch the vide interview here:
Sign up to our free monthly newsletter to recieve the latest on our interviews and articles.
By subscribing you agree to receive our newest articles and interviews and agree with our Privacy Policy.
You may unsubscribe at any time.
