What could a ‘multipolar world’ mean for investors?

Geopolitical risk assessment has become standard practice for the asset management industry, but that wasn’t always the case. Marko Papic, in his keynote address at the 2025 Global Markets Conference, admitted that when he started his career in finance in BCA research, it was a tough sell to clients to say politics and geopolitics matters. All that has since changed.

“You would walk into a room, begin expanding on geopolitics, and investors would just look at you as if you had three heads." In Australia however, he has always found a distinct receptiveness to the topic. He believes this may be due to our proximity to one of the world’s great superpowers, China.

The end of hegemony

Papic is focused on asking the big questions: What kind of a world do we live in and why does it matter? How will it impact the performance of your portfolio?

Papic opened his argument by stating, “Geopolitics is clear. We're not in a unipolar or hegemonic world. We haven't been in 10 years. Our geopolitical hardware that we run on has already been changed.”

It has transitioned from American hegemony, known as unipolarity, to being a multipolar, global world. Papic unpacked his schoolyard analogy to explain a complex global community.

“I often use the analogy of the schoolyard to think about the community of states in the world. The reason I think about it that way is because in the schoolyard, there’s nobody in charge. The teachers are taking a break and, quite frankly, they don’t care what happens in the schoolyard. What happens is that the distribution of power among the kids will determine whether that schoolyard is in chaos or if it’s a very orderly yard.”

His contention is that when there’s a hegemonic world order, it is a very ordered world.

“Think of it like a bully who is very powerful,” he said. “Everybody lines up in the mornings, gives them their lunch money, and that’s it, you’ve got to pay the fee so you don’t get beaten up.” This hegemonic world spawned the term “the Great Moderation”, and it was a very easy time to be an investor, he explained.  “We didn’t have to worry about geopolitics other than if we were investing in emerging and frontier markets.”

“We're not in a unipolar or hegemonic world. We haven't been in 10 years. Our geopolitical hardware that we run on has already been changed.”
– Marko Papic, Chief Strategist, GeoMacro, BCA

Are we in the bipolarity?

Most of the institutional investors Papic speaks to now believe that the world is headed towards a bipolar distribution of power between the United States and China. Papic disagrees, noting multipolarity is both more likely and has more longevity.

There are also significant downsides to geopolitics with genuine bipolarity. “In the schoolyard, there are two bullies,” said Papic. “They put a line of sand across the schoolyard and no-one’s allowed to cross it. Fights are not supposed to start without the two bullies being behind those fights. It’s an orderly world, but it’s not ideal because the two sides of the schoolyard don’t really talk to each other.”

He believes a bipolar world will be more inflationary, with fewer places to invest in. “Bipolarity is bad for globalisation: the world decouples, technological standards decouple, supply chains decoupled”

Importantly though, the balance of power is not evenly distributed between the two powers, making it a multipolar world.

Papic explained that a multipolar world is inherently unstable, with no single power able to enforce order. History and political science show that this kind of system tends to produce more frequent and dispersed conflicts, making it a more volatile environment overall.

Papic believes we have been living in a multipolar world since 2011, when there was a sudden spike in the number of armed conflicts.

“Over the course of the past 10 to 15 years, we’ve exploded in the number of armed conflicts around the world,” he said. “This is something most investors can’t get over. It seems the world is falling apart.” 

Elements that thrive in the multipolarity

Papic contended that this period of instability is not temporary. He said it can endure for a long time and, while it inevitably brings human tragedy through more frequent wars, it also produces other structural effects and opportunities that shape the global system. “There are also many positive aspects about living in a multipolar world.”

This includes a growth in technological progress, according to Papic. “Another positive of a multipolar world is technological innovation,” he noted. “Competition between states leads to research and development (R&D), which leads to governments being involved in funnelling dollars into R&D.”

Papic stressed that competition between states in a multipolar world will drive more meaningful technological progress. Governments are now investing in “critical productivity-enhancing technologies,” he said.

He contrasted this with the past two decades when “most of the venture dollars went into” convenience apps that made it easier to “get a cheeseburger at 3am.” rather than transforming how economies are powered, goods are shipped or people are transported. The difference, he suggested, is that geopolitical rivalry will push innovation towards advances that genuinely lift productivity.

Why Australian investors should hold steady

Michael Hutchison, Head of Geopolitical and Country Risk, CommBank, asked Papic how Australian investors should recalibrate their risk appetite to account for these changes in geopolitics. Papic suggested they remain calm, overall. Trade will not come to a standstill.

“Enemies go to war with one another, and they continue to trade with one another right up until the war. That is the distinct feature of a multipolar world.”

Hutchison also asked for Papic’s assessment of Australia's role as a destination for global capital, given that capital flows will diversify in this more polar environment.

“Australia is a premier destination,” said Papic. “And in this multipolar world, we need a lot of CapEx. Obviously, there is also a commodity story there. If I am a central banker, do I really just want to diversify into gold? It seems pretty 18th-century. But I think Australia and Canada would be my top two picks for that.”

“Enemies go to war with one another, and they continue to trade with one another right up until the war. That is the distinct feature of a multipolar world.”
– Marko Papic, Chief Strategist, GeoMacro, BCA

Economic wellbeing: Australia’s strategic advantage

“Research shows that in a multipolar world, in a world without clear leadership, without clear bullies being able to control their allies, globalisation actually persists and increases,” Papic told delegates.

Hutchison queried Papic’s reference to an advantageous “geopolitical promiscuity” Australia could capitalise on, with US President Trump viewing the world through an “America-first” lens.

“How would Australia do so?” Hutchison asked.

“Issue by issue, Australia has to defend its interests, and America will respect them,” said Papic. “Now, Australia obviously has a difficult security environment, because geographically speaking, Australia is between China and nothing. I understand there’s this real fear that the US doesn’t have to defend Australia. It has to defend Canada. But I think it is overstated as a risk.”

He added that Australia has a very complex threat environment, one where economic performance is the most important issue.

“You cannot have any geopolitical material power without generating enough economic wellbeing with which to pursue your interests. So that’s something that has to be made clear.”