Key Takeaways
- The US and China are aligning on geopolitical events and this direction of travel is fundamentally positive for markets.
- Investors need to distinguish between US President Donald Trump and the American industrial machine, which is extremely effective and forward-looking.
- Technology is a major long-term growth story, with advances in space, drones, and infrastructure.
Karen Gilchrist: In a fractured world, investors need to cut through the noise, understand how geopolitical shifts are influencing global markets, and, with a little luck, gain an insight into the inner workings at the center of power. For that, few people are better placed to shine a light than former White House presidential advisor, economist, and bestselling author, Dr. Pippa Malmgren.
Now Dr. Malmgren, thank you so much for joining us at the 2026 UK Morningstar Investment Conference. You were able to put a positive spin on global events at a time when there’s clearly a lot of anxiety. Just tell us a little bit about your thinking, what we’re perhaps missing, particularly as it pertains to the Iran war and the conflict around the Strait of Hormuz.
Dr Pippa Malmgren: Sure, and I didn’t have enough time in my remarks to get deeper into this issue, but if you step back, you can see that there was a clear progression of events. The US was very determined to cut off the oil supply, especially for China. So that meant taking out the head of the Mexican cartel, because they effectively control that oil supply. It meant taking out Venezuela, which happened. And it meant dealing with Iran and, of course, that oil supply is blocked.
Why? Because the message the US is giving to China is two choices: Star Wars or Star Trek. Star Wars is where you go to war with people. And Star Trek is where you go to war with problems. And since the US wants China to pick the Star Trek option, by cutting off that oil supply the message is: “of course, you can have as much oil as you want, but not if you want to go into conflict with the United States.”
To sweeten the deal, the US is also willing to negotiate on Taiwan, partly because the semiconductor production has now moved to Texas and Arizona. And so it’s completely changed the geopolitical landscape. And I suspect this may be why we’re seeing in China some internal disruption as they try to figure out, “which way do we want to go?” And I think the Communist Party is saying “we don’t want to go to war with the United States.” That would glitch the world economy so badly. Let’s instead figure out how to make money again, which is effectively the offer that Trump is making.
So given all those things, what are we seeing? The US and China are aligning on getting the Strait of Hormuz open again. They are aligning on how to resolve Ukraine. And they are aligning on how to negotiate a deal on Taiwan. So you may get some noisy rhetoric, but the direction of travel is fundamentally more positive for markets.
KG: OK. So this is all part of a larger strategy? You were former advisor to President George W. Bush. How should we think about how President Donald Trump is being advised and some of the processes that may or may not be in place now?
PM: So, another element of the strategy has to do with finance. And again a step that was taken before the action in Iran was to cut off the cash flow for the Iranian leadership. And the Secretary of the Treasury, Scott Bessent, is very clear about the steps he took to make that happen.
So I know the press is sort of saying “the president’s lost his mind and he doesn’t have a plan and it’s all chaos.” But I worked both for Ronald Reagan and for George W. Bush, and in both cases they were not liked at the time, and everyone said they’re stupid, they don’t know what they’re doing, but being up close you’re like, actually, there is a strategy.
It’s just that until it works, everybody is uneasy. Once it works, then they all turn around and they say, “Oh, you were a visionary.” I’m not saying the world is going to fall in love with Donald Trump. I’m not. But I am saying that as a person who served in these roles, I see a very clear strategy, and it’s sequential and it is working.
So this is what markets have to be careful about. And as I said in the speech, we have to distinguish between the man, who we may or may not like, and the American industrial machine, which is extremely effective and forward-looking.
KG: So markets may not be aware of the inner workings, but that being said we have seen that there’s been a more muted reaction to some of these events that we’ve seen lately. Why do you think that is? Do you view it as complacency or do you think that they’re taking a step back with a bigger lens?
PM: Look, markets are incredibly good at discounting the future. And so as a specific example, I was recently in China and South Korea. The headlines were full of “semiconductor production globally is going to stop because we need helium that had been coming from the Ras Laffan plant in Qatar that’s been blown sky high.”
But the thing is, the biggest helium reserve on the planet is in Texas, so it’s inevitable that the Koreans will just start buying and everybody else who makes semiconductors will just start buying from the Americans. So it’s just a shift in the supply chain. It’s not the termination of a supply chain.
But that’s not going to sell newspapers. So the newspapers are full of conflict and semiconductor production at risk. But market people are good at figuring out, “Oh, they’ll just shift the supply chain.” And, sure enough, only a few weeks ago Samsung and Hynix signed the deal with the United States to have their helium come from the US.
KG: So they are able to take a step back. Now you’ve given us the positive spin, but what are some of the bigger risks that markets might be overlooking, that have maybe been sidelined by current events?
PM: Sure. Well, first of all, I have to say I think markets are incredibly well pricing in the downside risks. What they’re not pricing in are the upside risks. And this is the danger: One gets so caught up in the headlines saying “it’s all a disaster,” and you miss that something more profound is in place or in play.
So I think that this administration has been seeking to achieve a kind of rapprochement with Russia and China in order to get a peace deal in Ukraine, and over Taiwan, because all the other conflicts can then be resolved if, at that level, it’s addressed.
Now, what’s the downside if it doesn’t work? Well, World War III. And nobody wants World War III with the caliber of technology and weapons systems that we now have. So this is the thing—it’s like the Cuban missile crisis. At the end of the day, the option of using your kinetic military capability isn’t really an option, because it would leave us without a future. And therefore, it’s not going to happen.
KG: So how then should investors be thinking about sort of filtering through noise and recognizing which shifts are structural? And how should this kind of shape the way they look at their asset allocation?
PM: This is a great question. So two things. First of all is to stop being blinded by the headlines and dig deeper into how can the supply chain shift, because supply chains are good at shifting.
Secondly, what I said in my talk is we have to remember every one of us has a kind of invisible digital sheepdog by our side right now, 24/7, and it’s made of the algorithms that dominate our lives, which are a function of what we click on.
And so if you keep clicking on the conflict headlines, you’re going to get more, because the purpose of the sheepdog is to fetch more of what you like and to fence off whatever you don’t like. And so it narrows the aperture of the view, the lens through which you see reality.
So the way to deal with it is to train your sheepdog better, and teach it to fetch a wider array of information. And so I’ve given lots of examples of what to click on: new technologies, why the space race is important, the subatomic race for nuclear power, all of which are total game changers for the world economy that would allow you to fix the debt problem.
So these are my recommendations: just to move away from the fear zone and train that sheepdog better to widen the aperture of your view.
KG: I’m glad you veered into technology, because I know you’ve spoken about there being four technological stages that we’re entering into. Tell us a little bit about those.
PM: Yeah, I’ve been trying to think of what’s the best way to help people see this. And the answer is: up, down, in and out.
What I mean by that is we’re moving up into everything above the ground: 3D printed housing, modular housing, drones, delivery from any place on earth to any place else in an hour, and the space race. And the space race is all about unlimited energy, unlimited resources, and unlimited internet connectivity, which together are a very positive game changer for Earth.
So that’s up.
Down is down into the atomic, subatomic, nano, quantum levels of reality, where there’s an equally vast economy with, again, abundant solutions available. That’s small modular reactors, which are now like half the size of a car, and you can move them around. So we can have not just new nuclear power plants that don’t melt down, but they can be put anywhere you need. So this is a game changer for the world.
So unlimited economy down, unlimited economy up.
In are the massive advances in medicine. And I use the example of HP. And now instead of only printing documents, they have bioink printers, where they can print your own tissue if you have a burn—they can print your own tissue onto your arm. We’re starting to see these kinds of things that massively improve longevity and health outcomes.
And then out is all the borderless stuff. So that’s supercomputing networks, artificial intelligence, anything that’s just without a border.
So when you’re feeling pessimistic, all you need to do is remember that in each direction we are expanding exponentially. So it’s easy to get out of the fear zone and into the “oh my gosh, how are we going to participate in the performance that these things will bring?”
KG: Thank you so much. A very positive note to end on. Dr Pippa Malmgren, thank you for your time.
Thank you. For Morningstar, I’m Karen Gilchrist.
