🌐 A New Paradigm: From Globalization to Localism 🌐
Winners: Nasdaq, Japan Equity. Losers: Euro, Russian Ruble, Brazilian Real, Colombian Peso.
We are witnessing the dawn of a new era—a fundamental shift from the interconnected, predictable world of globalization to the fragmented, complex landscape of localism. This isn’t merely about trade adjustments or policy shifts; it’s a recalibration of power. In this emerging order, the United States, Japan, and India are positioning themselves as key players, while other regions, like the eurozone and resource-dependent nations such as the Eurozone, Brazil, Colombia, and Russia, grapple with existential challenges. China, too, stands at a crossroads, transforming its economy and production model to stay relevant.
At MacroWise, we believe understanding this shift requires a fresh perspective, one that goes beyond conventional financial metrics. It's not only about performance and volatility; it’s about performance and learning. Because in a world where disruption is constant, survival depends not on stability but on adaptability and growth.
Through this lens, we classify countries and companies into four distinct archetypes:
Zombie: Entities that appear stable, with low volatility and steady returns, yet lack the capacity to evolve. They are optimized for yesterday’s world, not tomorrow’s.
Dragonfly: Those who embrace change, even if their performance has yet to peak. They are reforming, positioning themselves to thrive in an uncertain future.
Rockstar: Balanced performers who excel and adapt simultaneously, continuously evolving with the world around them.
Icarus: High performers with limited adaptability. They soar to great heights but are vulnerable to the next big shift.
🔍 Understanding the Archetypes Through Learning vs. Performance 🔍
Each archetype follows a unique path in terms of learning and performance:
Zombies: They score low on both learning and performance, ignoring the signs of change. While they may seem stable, they are at risk of volatility spikes or even collapse when disruption strikes.
Dragonflies: These entities prioritize learning, using volatility as a means to adapt and grow. Although their performance may lag initially, their resilience prepares them for sustainable, long-term success.
Rockstars: They excel in both performance and learning, balancing growth with stability. Rockstars weather initial volatility but refine their processes over time, stabilizing in a rapidly evolving world.
Icarus: High in performance but low in adaptability, they face episodes of intense volatility, much like financial bubbles. They achieve spectacular heights but are susceptible to dramatic falls when conditions change.
📈 Volatility Patterns Over Time 📈
Each archetype also demonstrates a distinctive volatility pattern:
Zombies experience prolonged low volatility, often interrupted by sudden, severe crashes.
Dragonflies operate within high volatility, harnessing it as fuel for growth and adaptability.
Rockstars start with high volatility that gradually reduces as they optimize, until they approach the Icarus stage, where volatility starts to spike once again.
Icarus entities remain in a heightened state of volatility, with episodes of extreme instability signaling a peak in the short term.
🌎 Applying the Framework: Winners and Losers in the Shift to Localism 🌎
Using our framework, we can observe how different regions and nations align with these archetypes in today’s rapidly evolving world:
The Eurozone, Brazil, Colombia, and Russia represent Zombies on the verge of hyper-volatility. The eurozone faces high energy costs, heavy regulations, and an ongoing conflict with Russia, which burdens its growth potential. Russia, reliant on oil and entangled in war, struggles to transition its economy. Brazil and Colombia, dependent on oil exports, face mounting challenges as the world shifts from oil to electricity, compounded by fiscal deficits and populist leadership.
China is in a critical phase of transformation. Once a Zombie with an economy tied to real estate, China is now shifting toward exports of electric vehicles and advanced manufacturing, hinting at a new model of production.
India emerges as a quintessential Dragonfly. Adapting rapidly, India stands poised to be one of the most compelling emerging market stories, investing in learning and reform to secure a place in this new paradigm.
Japan has transitioned from Zombie to Dragonfly and is now on the cusp of becoming a Rockstar. Its journey since 2013 reflects the power of adaptability in a changing world.
The United States remains well-positioned, with companies like NVIDIA possibly moving from Rockstar to Icarus—riding high on performance yet increasingly exposed to market shifts.
Because in a world redefined by localism, true power lies not in merely surviving but in evolving faster than the competition—shaping the future on your own terms.
Red : Nasdaq logarithmic. Black: USDBRL, Purple: USDCOP.
This landscape bears a strong resemblance to the dynamics between 1995-2000, when the tech bull market was soaring in the United States, while emerging markets suffered a cascade of crises. The tech sector exemplified the Rockstar archetype—high-performing and rapidly evolving—until the bubble burst. At the same time, emerging markets represented Zombies and Dragonflies, struggling to adapt to a new era of rapid technological progress and global capital flows, leaving them exposed to volatility spikes and financial instability.
Thanks for reading,
Disclaimer: This post is for informational purposes only and should not be considered financial advice. Please consult with a financial professional before making any investment decisions.
Guillermo Valencia A
Cofounder of Macrowise
November 13th , 2024
Excelente documento Guillermo! Fue un verdadero placer conocerte!