Threats to sovereign control

Sovereign nations are increasingly met by forces beyond their borders. As such, many of today's key political questions arise from how nations will deal with these challenges. Here, Arvind Rajan, Head of Global and Macro, PGIM Fixed Income, expands on the threats to sovereign control and the key considerations for investors.

Implications for global fixed income

Investors must evaluate the impact of geopolitical events such as the trade tensions between the US and China, Brexit, and the rise of populism in Europe. In this video, Arvind Rajan, looks at how today's complex market environment could create rich sources of Alpha for investors.

Two Powerful trends reshaping the geopolitical landscape

1. Rumors of the demise of globalization are greatly exaggerated.

Cross-border flows of financial, human and digital capital are reaching high water marks—with new technologies further accelerating the pace of global change.

2. A populist backlash against globalization has taken hold in developed markets—at times focused on free trade and at times on immigration.

The momentum behind global integration and the "borderless" challenges this has created is seen as a threat to state sovereignty - and now, nation-states are taking a variety of actions to wrest back control.

Three potential responses to monitor

• A populist backlash in developed markets potentially threatens the agreements global trade is built on
• Crackdown on cyberspace and the media
• "Carrots and sticks" approach to encourage the return of the "local" multinational

Key investment considerations

The escalating tussle between globalization and nationalism could have significant implications for global markets. As a result, institutional investors may want to consider rethinking their investment approach across 5 primary areas.