Every so often, history offers you a hinge. A moment where the path taken determines the next several decades of global order. I believe we are living through one of those moments right now.

And yet, I want to be clear about something upfront: I do not have a complete answer. I have a framework. I have strong convictions on most of my positioning. But on a meaningful portion of it, I am deliberately sitting with cash and hedges, because the outcome of one singular variable will determine everything, and that variable is the Strait of Hormuz.

Let me explain why.

The Empire Wants Its Mojo Back

The United States today carries a debt-to-GDP ratio of approximately 122%. Since the year 1800, there are 52 recorded cases of nations reaching the 120 to 130% threshold. 51 out of 52 defaulted, either outright, or by inflating away the debt. The only modern exception is Japan.

The one prior time the United States itself approached this level was in the aftermath of World War II, when the ratio peaked at approximately 120% in 1946. And what did they do between 1944 and 1952? They allowed inflation to run hot. They kept interest rates suppressed. They channelled capital into massive industrial production. Bond holders were not defaulted upon, but the real value of those bonds quietly eroded. By 1952, the US debt-to-GDP had fallen to 75%.

That is exactly the playbook they are running again today.

US manufacturing is currently under 10% of GDP, low for a country trying to reassert itself as the anchor of global order. If manufacturing as a percentage of GDP moves even modestly, on a $27 trillion base, the scale of economic activity unlocked is extraordinary. Capital is being reallocated from services to real assets. The mega-cap tech companies that spent the last decade generating enormous free cash flows and buying back their own stock are now pivoting to capital expenditure at close to a trillion dollars annually, directed at physical data centres, chips, and power infrastructure. They are going from cash flow positive to cash flow negative. This is not coincidence. This is a deliberate reindustrialisation strategy.

There is also a fiscal reality that makes this reindustrialisation non-negotiable. The US is running a fiscal deficit of close to 6% of GDP but at full employment. It is running on a treadmill and must run faster every day. That limits its own fiscal space considerably, which means the more interesting fiscal spending story over the coming years is actually outside the United States. Europe will spend on defence. India will spend on infrastructure and manufacturing. Latin America has fiscal room it has not yet used. Every country that was previously outsourcing its security and energy to the US-led order now has no choice but to spend for itself. That fiscal impulse, distributed across the rest of the world, is a powerful tailwind for non-US assets.

What Is Already Clear, Regardless of Outcome

Even without knowing how the Hormuz question resolves, several things are structurally clear.

Energy security becomes the defining national priority for every major economy: The United States will double down on critical materials. China will double down on chips and energy security. India will double down on all three. Europe, constrained by its welfare state commitments and its historically outsourced defence posture, will scramble to spend on things it should have invested in years ago.

In the next five years, energy will effectively be abundant: There has never been a shortage in history that was not eventually followed by abundance. Governments with sufficient incentive will now overinvest at speed in oil, gas, solar, and nuclear. My strong view is that the oil price we see today will not be the oil price of five years from now. The supply response, once governments commit to it, tends to be far larger than the market expects. The grid and electrification infrastructure will take longer to respond, simply because you cannot build copper mines and power transmission networks overnight.

On copper: Robert Friedland, arguably the world’s foremost authority on the subject, has said clearly that it takes approximately 17 years to bring a new copper mine online and that we simply do not have enough copper for the electrification transition. Every wire, every motor, every transformer requires it. Aluminium is equally critical. The companies with captive power plants in aluminium smelting are positioned to generate extraordinary returns in this cycle, precisely because the bottleneck is not demand, it is the availability of cheap and reliable power.

Drones and missiles are what aircraft were five years ago: The future of warfare has already changed. Operation Sindoor demonstrated it. Ukraine demonstrated it. The Gulf is demonstrating it again now. The entire defence ecosystem is spending, in Europe, in the Gulf, and in India. Defence is a significant structural winner regardless of how this particular conflict ends.

Gold is telling you something important: If gold is rising, the US is losing ground in this conflict. If gold is falling, the US is winning. Watch it as a real-time signal, not as noise. More structurally, there is serious and credible discussion about the US revaluing its 8,133 tons of government-held gold from the current statutory book value of $42.22 per ounce toward something approaching market price. At $5,000 per ounce, that unlocks approximately $1.3 trillion on the government balance sheet. At $10,000 per ounce, approximately $2.6 trillion. This would be the first time in the post-Bretton Woods era that the United States might formally legitimise gold as a reserve asset, an enormous admission. The Fed would simply credit the US Treasury account by the equivalent value. It is an accounting entry, but the signal it sends to every central bank in the world would be irreversible. The day that happens, gold will not be $5,000. It will be something else entirely.

The Variable That Changes Everything

Does the United States gain control of the Strait of Hormuz?

This is not simply a geopolitical question. It is the most important asset allocation question in the world today. Venezuela’s oil, plus the Strait of Hormuz, plus the US’s own 13 million barrels per day of production, would make America the controlling force over a very significant share of global energy assets. With that kind of leverage, you can impose terms on every trading partner, every central bank, every nation.

If the United States controls the Strait, US assets will outperform the rest of the world. The stablecoin architecture they are already building, where any country wanting access to US consumers must transact in US dollar-backed instruments backed by US Treasuries, becomes fully enforceable. That gives America a permanent structural buyer for its debt and a mechanism to extend dollar hegemony without printing physical notes.

If the United States does not control the Strait, we are watching a Suez Canal moment. Today, if the US fails to secure this chokepoint, the mega-cap tech holdings that sovereign wealth funds, pension funds, and central banks have accumulated will be sold. Not because those businesses are bad, but because that capital is urgently needed at home. Europe owns approximately 7% of US equities. Canada has over a trillion dollars in US-exposed pension assets. GCC sovereign wealth funds have bet heavily on US technology. If this effort does not succeed, that capital goes home.

I assign approximately 25 to 30% probability to the US securing the Strait. Not because I am bearish on America, but because the stomach required to sustain that kind of campaign in the age of satellite surveillance and real-time social media is a fundamentally different proposition from anything attempted before. In Vietnam, information reached the public months after the fact. Today, every adversary has satellite coverage. The tolerance for casualties in a democracy is not what it once was. If an empire can no longer stomach its children coming home in caskets, and every other party in the conflict can, the empire has already lost something essential.

The Monetary System Is Bifurcating

In parallel, the architecture of global money is quietly splitting into two branches.

One branch is the US stablecoin system, dollar-backed digital instruments designed to extend dollar hegemony without printing physical notes. Today, approximately 45% of physical US dollars in circulation exist outside the United States, with cartels, oligarchs, and informal economies. Stablecoins would allow the US to bring all of that into a controlled, traceable digital system, while simultaneously creating perpetual demand for US Treasuries. It is elegant, if they can execute it.

The other branch is a gold-settlement system, quietly being constructed along the Belt and Road. China’s solution to the surplus Yuan problem is straightforward: take your Yuan to the Shanghai Metal Exchange, convert it to gold, hold it in a vault we will establish for you, in Kyrgyzstan, in Saudi Arabia, in Hong Kong, in Singapore, and reportedly now in GIFT City. This is not speculation. It is happening. Kyrgyzstan, a nation that historically held around 50 tons of gold, is opening a 2,000-ton gold vault.

The Valuation Problem at the Heart of Global Portfolios

In 1989, Japan represented approximately 18% of global GDP but around 48% of global market capitalisation. Everyone knows what happened to Japanese equity valuations over the next 30 years. The businesses were largely fine. The prices were simply unsustainable.

Today, the United States is approximately 25% of global GDP but around 65% of global market capitalisation. The gap between economic weight and market weight has rarely, if ever, been wider.

This is not a comment on the quality of American businesses. Microsoft, Nvidia, Apple - these are world class companies. But there are long periods, five years, sometimes ten, where extraordinary businesses generate zero or negative returns simply because the starting price was too high. Microsoft has gone nowhere for two years. Nvidia has gone nowhere for eight months. Apple has been dead money for a sustained period. Not because earnings collapsed, but because the price already reflected perfection.

Meanwhile, Japan and China have already completed their CAPEX cycles. They are generating free cash flow and conducting buybacks. Would you rather own a business entering a capital expenditure cycle and issuing new equity and bonds, or one returning cash to shareholders?

Between 2010 and 2020, passive flows into US mega-cap tech became self-reinforcing. Money flowed into benchmarks, which inflated mega-cap weights, which attracted more passive money. Active fund managers lost the decade. I believe the reversal of that cycle has already begun. Over the next ten years, active fund managers will outperform passive, and money will leave US mega-cap in search of returns elsewhere.

Latin America, particularly Brazil, Argentina, and Chile, is one of the highest-conviction allocation opportunities I see. It is too geographically remote to be drawn into any of these great power conflicts. It has energy, copper, and agricultural resources. It has fiscal space that the United States no longer has.

China is another conviction. Here is an underappreciated insight: the country with cheap and reliable electricity wins the economics of the intelligence economy. China processed more AI tokens in February than the United States did, and it is deliberately channelling power away from energy-intensive industrial processes and into data centres. The aluminium that China is pulling back from will be smelted elsewhere, by producers with captive power. The pieces of this puzzle fit together in ways that most global allocators are not yet pricing.

Where I Stand Today

The themes I am most confident in: electrification infrastructure, drones and missiles, US industrials and reindustrialisation plays, uranium, copper, solar, and select Latin American and Chinese equities. These do not require knowing the outcome of the Hormuz question. They look right regardless.

The cash I am holding in reserve is waiting for clarity on that single variable. It will determine whether to rotate toward US assets or accelerate a rest-of-world positioning. I will not deploy it on the basis of a guess.

The signals worth watching most closely are not the headlines. They are the oil price and the gold price. They are the truest real-time indicators of who is winning.

At Brent around $100 with a meaningful portion of the Strait reportedly disrupted, the market is cautious but not catastrophising. It believes this resolves. I am not certain the market is right.

More money is made in the journey than at the destination. I do not need to know exactly how this ends to be positioned correctly along the way. But I will not pretend to have a view I do not have, and anyone telling you they know precisely how this resolves are either mistaken or selling something.

Watch the Strait. Watch the gold price. Watch the long end of the US yield curve.

Everything else is noise.