States take the lead: The end of full free trade?
The year 2025 ends on a paradox: financial markets seem more essential than ever, yet confidence appears fragile. Why? Because the economic, monetary, and geopolitical environment has fundamentally changed.
On the other hand, states, long relegated to the background in the world of markets, are now taking the initiative. Massive subsidies, incentives for industrial reshoring, stricter regulatory frameworks: the “invisible hand” of the market suddenly becomes much more visible.
For individual investors, taking a position today means navigating two increasingly intertwined worlds: financial markets and public authorities, an environment often more volatile than the markets themselves.
Under these conditions, investing requires a nuanced strategy and rigorous risk management, with risks now more concentrated than ever.
In this article, we first examine the state of the markets in 2026, then the rise of state capitalism and fragmented international trade, before suggesting concrete action points.
Markets under structural pressure
a) Interest rates, valuations, and growth
Forecasts for 2026 suggest a moderate growth environment, where interest rates are expected to remain high or only be reduced cautiously.
- A partial rate cut may occur, but it does not guarantee a spectacular market rebound.
- For equities to remain attractive, companies will need to continue delivering solid earnings growth. On the surface, this seems feasible: for example, J.P. Morgan Asset Management estimates that a traditional portfolio composed of 60% equities and 40% bonds could continue to provide an average annual return of around 6.4% over the next 10–15 years. Historically, such a portfolio has generated annual returns ranging from 6.5% to 9%, depending on the markets considered.
b) Geopolitics & uncertainty
Geopolitical tensions (Sino-American rivalries, the Russia-Ukraine conflict, energy dependencies, to name only a few), along with a volatile consumer confidence index, continue to feed market volatility.
Markets dislike uncertainty, especially when the traditional economy is shaken by sometimes absurd political strategies, driven more by electoral objectives than the public interest. The economy may then show signs of weakness… or, conversely, overheating.
Moreover, high-profile sectors such as technology or artificial intelligence must now prove the long-term robustness of their business models to justify still-high valuations.
c) Markets = Opportunities, but with caution
Trusting the markets does not mean investing blindly. It requires understanding the context, accepting some volatility, and focusing on companies with solid fundamentals capable of delivering innovation and long-term value. In short: markets remain useful, but automatic confidence is a thing of the past.
States take the lead
a) The return of interventionism
The United States, the European Union, and China are no longer merely regulating the economy: they are redefining the rules of the game and imposing new operational standards. For example, the U.S. Chips and Science Act and Europe’s Net Zero Industry Act aim to reshore strategic activities. This phenomenon is part of a broader trend, now called “bloc capitalism,” where states simultaneously act as investors, regulators, and sometimes even competitors.
b) Towards the end of full free trade
The classic model of global trade, based on unlimited liberalization, now appears fragile, even challenged. Several studies anticipate increasing fragmentation and a reduction in intercontinental trade.
According to the World Trade Organization (WTO), if it still retains its reference status, global trade volumes are expected to decline in 2025, before a modest rebound in 2026. Meanwhile, the consolidation of maritime flows points to an approximate 1.8% reduction in sea transport over the same period.
For investors, this means that supply chains, dependence on strategic resources, and geopolitical tensions are key risk factors… but also, potentially, sources of opportunity.
Implications for investors
a) Renewed Diversification
In 2026, diversification can no longer be limited to the traditional distinction between developed and emerging markets. It is essential to:
- Gain geographic exposure by balancing positions across the Americas, Europe, Japan, and Asia;
- Diversify asset classes, combining equities, bonds, infrastructure, and commodities.
Beyond allocation, the quality of selected companies becomes crucial. Consultants recommend prioritizing firms capable of generating stable cash flows and possessing genuine pricing power, ensuring resilient performance even during volatility.
Additionally, it may be wise to include tangible assets, such as infrastructure or strategic resources, which benefit from public policies and industrial reshoring. This approach not only reduces overall portfolio risk but also captures new opportunities created by state intervention and geopolitical shifts.
b) Positioning “With” rather than “Against” states
When public policies become a major lever, green energy, semiconductors, and industrial revitalization, the savvy investor faces a key question: align with or go against state initiatives?
- Aligning with the state means investing in sectors and companies that directly benefit from public policies, including subsidies, industrial reshoring, or favorable regulations. Examples include renewable energy infrastructure, semiconductor production, or strategic resources for the energy transition.
- Success is never guaranteed: often, an Asian competitor enters the field, invoking free-trade principles… while interpreting the rules and the notion of reciprocity to its advantage. Consequently, the core problem is thrown back into our own court, like a boomerang.
The middle path is often the best choice, focusing on secular growth trends where companies serve as “enablers” and “implementers.” It demands, however, a good grasp of the market landscape, clarity on roles, and, above all, a vigilant approach.
c) Accepting increased volatility
The “old world,” or rather the prolonged stable world, is over. Volatility, surprises, and corrections are to be expected. This is not a reason to stay out, but a reason to adapt your horizon, tolerance, and risk management.
Moving Forward
The question is no longer whether we can trust the markets, but how to do so wisely. In 2026, confidence is no longer “automatic”: it is built day by day through analysis, anticipation, and understanding of new economic dynamics.
Markets remain essential, but now operate in an environment shaped by:
- Increased state intervention,
- Fragmentation of global trade,
- Acceleration of energy and industrial transition.
For investors, this requires greater vigilance, strategic thinking, and adaptability — but also offers more opportunities for those able to adjust.
In short: the markets are not disappearing — they are evolving.