Speaker Jim Haskel
I'm senior portfolio strategist Jim Haskel and I want to welcome you to the fourth quarter CIO call.
Bridgewater CIOs discuss 2026 global outlook shaped by modern mercantilism, AI-driven growth, and strategic capital allocation.
Key Takeaways
- Modern mercantilism is a key driver of global economic and geopolitical shifts in 2026.
- AI investment is accelerating rapidly, influencing growth, inflation, and resource allocation.
- Global capital flows are increasingly inward-focused due to mercantilist policies and geopolitical tensions.
- Portfolio resilience and adaptability are critical given the uncertainty and rapid changes in the global landscape.
- Bridgewater leverages decades of systemization to analyze and respond to these complex forces.
Summary
- Bridgewater marks its 50-year anniversary with leadership reinvestment and simplified governance.
- 2026 global outlook is dominated by modern mercantilism and AI, reshaping markets and capital flows.
- Modern mercantilism involves states pursuing wealth, strength, and self-sufficiency unilaterally, with the US fully adopting this in 2025.
- The US shift to mercantilism is prompting other countries to increase inward spending on infrastructure, defense, and strategic sectors.
- Countries historically net savers like Germany, Korea, and Japan are now focusing on raising internal returns and retaining capital.
- AI is entering a new phase driven by exponential scaling laws, requiring massive physical world resource investment.
- Competitive dynamics in AI investment create a 'resource grab' mentality to avoid under-investing.
- AI capital expenditure is significantly contributing to US economic growth and impacting inflation through increased physical resource use.
- Bridgewater emphasizes the need for deep understanding and humility in portfolio construction amid these uncertainties.
- Strategic and tactical capital allocation approaches will be discussed to navigate this evolving environment.
Full Transcript — Download SRT & Markdown
Speaker Jim Haskel
In today's call, Karen will touch on the global outlook, Greg will discuss the next phase of the AI boom, and then both Bob and Greg will talk about how we're thinking about allocating capital in 2026, both strategically and tactically.
Speaker Bob Prince
You know, thank you, Jim. Um, you know, but I think that before we dive into things, I just want to take a second and reflect on where we've been and where we're going.
Speaker Bob Prince
Um, 2025 was a really big year for Bridgewater, it was our 50-year anniversary, we opened our New York City office, we completed the Ray transition, which then led us to completely simplify our governance and our financial structure, and what was incredible is that in response to all of that, our entire leadership team reinvested in the business.
Speaker Bob Prince
And at the end of this year, 60% of the employees of Bridgewater are going to own stock in Bridgewater.
Speaker Bob Prince
It's pretty amazing that when you sit here on your 50th anniversary, uh, and for me, it, it, it feels like the startup that I walked into 40 years ago, um, but with, you know, four generations of depth, uh, 50 years of experience, uh, and resources.
Speaker Bob Prince
Um, now that doesn't mean we're not going to get things wrong, we will definitely get things wrong, it's in the nature of what we do to get things wrong, the key is to learn from it and improve, and what I see in our team is a real hunger to do that.
Speaker Jim Haskel
Now, let me bring in Karen, and Karen, um, let's turn now to the global outlook and what we're seeing in the world right now.
Speaker Karen Karniol-Tambour
Thanks, Jim, it's great to be here. We head into 2026 with a world that has been radically reshaped by modern mercantilism and AI.
Speaker Karen Karniol-Tambour
These two forces, they are everywhere, they are rewiring everything.
Speaker Karen Karniol-Tambour
And it's not possible to trade global markets anymore without deeply understanding these forces.
Speaker Karen Karniol-Tambour
So, what's the next chapter of these two forces? Where are these two forces going?
Speaker Karen Karniol-Tambour
As we look at these two forces, they are both generating non-cyclical spending that is propelling the expansion forward.
Speaker Karen Karniol-Tambour
As it does that, it's creating an expansion with a certain shape and size, and that's building up risks along the way.
Speaker Karen Karniol-Tambour
Because of the particular shape and size of this expansion, we have relatively easy monetary and fiscal policies.
Speaker Karen Karniol-Tambour
Into a generational size AI cap X boom, at the same time that we keep having very high needs for fiscal policy.
Speaker Karen Karniol-Tambour
Or we have very high government debts, political pressures.
Speaker Karen Karniol-Tambour
So, our approach, as we look at this world, is two things.
Speaker Karen Karniol-Tambour
One, you have to build a deep understanding of this new reality.
Speaker Karen Karniol-Tambour
You can't trade markets otherwise.
Speaker Karen Karniol-Tambour
But at the same time, you have to have the humility to recognize that there's a lot of uncertainty here.
Speaker Karen Karniol-Tambour
And you have to build portfolios resilient to where the world might go.
Speaker Karen Karniol-Tambour
And you're going to hear myself, Greg, and Bob speak about both sides of really the same coin here.
Speaker Karen Karniol-Tambour
So, let me start by, um, these two forces.
Speaker Karen Karniol-Tambour
Modern mercantilism and AI, where we see them going.
Speaker Karen Karniol-Tambour
So, modern mercantilism, look, China's operated this way for a long time.
Speaker Karen Karniol-Tambour
And the US has kind of been inching in this direction, but in 2025, the US sort of fully shifted into modern mercantilism.
Speaker Karen Karniol-Tambour
And we coined this term to describe this environment that we're in.
Speaker Karen Karniol-Tambour
What we mean by that is really that the state's role is to pursue wealth, strength, self-sufficiency.
Speaker Karen Karniol-Tambour
And to do that really unilaterally.
Speaker Karen Karniol-Tambour
To to go after these things, right?
Speaker Karen Karniol-Tambour
And, you know, it's a constant flow, like as Greg talked about, the world is changing so rapidly.
Speaker Karen Karniol-Tambour
We're getting such a constant flow of information, the pace at which we're seeing things in the world.
Speaker Karen Karniol-Tambour
And thinking we got to incorporate these into our process, it's rapid.
Speaker Karen Karniol-Tambour
So, we've really benefited from having 50 years of systemization.
Speaker Karen Karniol-Tambour
And then thinking, how do we organize all of these new activities?
Speaker Karen Karniol-Tambour
And what you're seeing here is that we've sort of divided all of this set of information into key areas.
Speaker Karen Karniol-Tambour
Where the US is choosing to advance these goals via kind of certain paths, right?
Speaker Karen Karniol-Tambour
The US is choosing to try to avoid trade deficits because of the view that national wealth is maximized that way, self-sufficiency is maximized that way.
Speaker Karen Karniol-Tambour
The US is choosing to protect strategic sectors, going after things like self-sufficiency, things like rare earths, um, things like semiconductors.
Speaker Karen Karniol-Tambour
And using transactional and at times even coercive foreign policies to get at these goals.
Speaker Karen Karniol-Tambour
So, a lot's happening, US has fully kind of shifted into this paradigm.
Speaker Karen Karniol-Tambour
What's the next chapter? Where is this going?
Speaker Karen Karniol-Tambour
As we look into 2026, the big thing that's occurring is that the world is now responding to the US.
Speaker Karen Karniol-Tambour
Having fully shifted in this direction in 2025.
Speaker Karen Karniol-Tambour
And that is generating the next set of spending and of capital flows.
Speaker Karen Karniol-Tambour
So, the US mercantilism is begetting more mercantilism.
Speaker Karen Karniol-Tambour
From the rest of the world, right?
Speaker Karen Karniol-Tambour
An emboldened United States is really imploring every country in the world to look inward.
Speaker Karen Karniol-Tambour
And what we didn't really see last year was a lot of retaliation.
Speaker Karen Karniol-Tambour
Right, higher and higher tariffs, that accelerating.
Speaker Karen Karniol-Tambour
What we saw instead is countries looking inwards and saying, wait a minute.
Speaker Karen Karniol-Tambour
No one can afford to rely on exports.
Speaker Karen Karniol-Tambour
The US is the biggest trade deficit country.
Speaker Karen Karniol-Tambour
It doesn't want a bigger and bigger trade deficits.
Speaker Karen Karniol-Tambour
China is at everyone's heels, becoming more and more competitive.
Speaker Karen Karniol-Tambour
Once supply chains have been weaponized, nobody can afford to ignore those vulnerabilities.
Speaker Karen Karniol-Tambour
Everybody needs to spend to deal with that.
Speaker Karen Karniol-Tambour
And once the US security umbrella has been shaken as it has been.
Speaker Karen Karniol-Tambour
No one can afford not to be worrying about defense and national security.
Speaker Karen Karniol-Tambour
So, you're seeing these pressures turn into really what are multi-year commitments.
Speaker Karen Karniol-Tambour
To be spending down these paths, infrastructure, national security, rare earth.
Speaker Karen Karniol-Tambour
These are multi-year commitments, and importantly, they're coming from what are often been historical net savers.
Speaker Karen Karniol-Tambour
Countries like Germany, Korea, Japan, that have historically exported capital because there wasn't really a need for it inward.
Speaker Karen Karniol-Tambour
Have instead really needed to kind of raise the returns on what can be generated internally.
Speaker Karen Karniol-Tambour
Try to keep the capital inside instead of sending it out.
Speaker Karen Karniol-Tambour
So, these are both important drivers for what we see for global growth and inflation.
Speaker Karen Karniol-Tambour
As well as important cross-border capital drivers that are determining kind of which countries.
Speaker Karen Karniol-Tambour
What the relative pressures are.
Speaker Karen Karniol-Tambour
Let me go to AI.
Speaker Karen Karniol-Tambour
This is the second important force.
Speaker Karen Karniol-Tambour
And Greg will talk about it as well.
Speaker Karen Karniol-Tambour
But AI's also in a new phase.
Speaker Karen Karniol-Tambour
What has occurred is that scaling laws have continued to prove true.
Speaker Karen Karniol-Tambour
In other words, there is a sense that if you could just spend enough, and that really requires exponential spending.
Speaker Karen Karniol-Tambour
That's what the scaling is about.
Speaker Karen Karniol-Tambour
You could be at, you know, kind of the breakthrough of what is likely to be the most transformational technology.
Speaker Karen Karniol-Tambour
That we've seen certainly in our lifetimes.
Speaker Karen Karniol-Tambour
And so that is creating what we've called these resource grab dynamics, right?
Speaker Karen Karniol-Tambour
Because if you need to spend exponential amounts, and that's spending in the physical world.
Speaker Karen Karniol-Tambour
There's a limit of how much can be spent in the physical world.
Speaker Karen Karniol-Tambour
There's only so much energy, components, memory.
Speaker Karen Karniol-Tambour
So, that's the resource grab.
Speaker Karen Karniol-Tambour
Grab everything you can.
Speaker Karen Karniol-Tambour
Spend as fast as you can.
Speaker Karen Karniol-Tambour
You get that mentality in this sort of quote we have here.
Speaker Karen Karniol-Tambour
Which is, you know, the CEO of Alphabet saying, the risk of under-investing is dramatically greater than the risk of over-investing.
Speaker Karen Karniol-Tambour
That's these competitive dynamics where if one player is investing, you don't want to be behind.
Speaker Karen Karniol-Tambour
You don't want to be investing less than them.
Speaker Karen Karniol-Tambour
So, at this point, that spending is already turning into actual impact on US growth.
Speaker Karen Karniol-Tambour
Spending that is becoming a bigger and bigger pie of what the economy is like.
Speaker Karen Karniol-Tambour
You can see this acceleration in how this AI cap X spending is affecting US growth.
Speaker Karen Karniol-Tambour
And this is both literally translating into spending.
Speaker Karen Karniol-Tambour
Putting physical pressure on inflation and physical things like electricity that are often very salient to households.
Speaker Karen Karniol-Tambour
And this is primarily the spending of a few large hyperscalers.
Speaker Karen Karniol-Tambour
Going forward, it will be a lot more than that.
Speaker Karen Karniol-Tambour
You're going to get sovereign spending in order to make sure they don't fall behind on national security.
Speaker Karen Karniol-Tambour
You're going to get companies that today don't see themselves as AI players, realizing that they're at existential risk if they don't spend.
Speaker Karen Karniol-Tambour
This is going to keep accelerating.
Speaker Jim Haskel
Greg, let's turn to you, you've been leading our AI efforts, you've built the team around you.
Speaker Jim Haskel
Walk us through this next phase of the AI boom.
Speaker Greg Jensen
Sure, let me start with how we're trying to get our hands around what's going on.
Speaker Greg Jensen
I think understanding this technological transformation is one of the most important things you need to do to be an investor at this point.
Speaker Greg Jensen
There's you can't avoid it.
Speaker Greg Jensen
Um, three ways we're getting there, one is being practitioners.
Speaker Greg Jensen
As you know, we've built AI labs, we've been thinking about this question for a very long time.
Speaker Greg Jensen
And we've got 50 people focused solely on how to build an artificial investor that's amazing.
Speaker Greg Jensen
That eventually can out-compete all human investors.
Speaker Greg Jensen
That's the goal of that team.
Speaker Greg Jensen
Huge challenge in using the tools and a lot of understanding the tools that goes into that.
Speaker Greg Jensen
We're also really last year was a huge ramp up in using AI.
Speaker Greg Jensen
To increase the productivity of human investors in a very significant way.
Speaker Greg Jensen
So those as practitioners, we're we've got our hands in the pot there.
Speaker Greg Jensen
So let me take you a little into what we're seeing.
Speaker Greg Jensen
In terms of the phase.
Speaker Greg Jensen
The um, AI boom is getting more dangerous.
Speaker Greg Jensen
For reasons that Karen laid out.
Speaker Greg Jensen
Last year, I I said sort of the bubble's ahead of us.
Speaker Greg Jensen
Like we're not in a bubble, the bubble's ahead of us.
Speaker Greg Jensen
And what I was trying to get at then is there was a lot of known things that were going to happen in 2025.
Speaker Greg Jensen
The investment was going to happen.
Speaker Greg Jensen
There's massive amount.
Speaker Greg Jensen
It was under-discounted in the markets.
Speaker Greg Jensen
Today, I still think that's largely true and we'll get into the subtlety of that.
Speaker Greg Jensen
But it is definitely more dangerous.
Speaker Greg Jensen
Now everybody is on it.
Speaker Greg Jensen
There's a huge research grab phase.
Speaker Greg Jensen
The capital expenditures are going to be at record capital expenditure levels.
Speaker Greg Jensen
Um, across the US economy and across the globe.
Speaker Greg Jensen
The um, the need for capital.
Speaker Greg Jensen
Is growing and massive, you went from Microsoft and Google being huge savers.
Speaker Greg Jensen
That benefited financial markets because they were doing big buybacks.
Speaker Greg Jensen
And and building up big balance sheets of cash and so on.
Speaker Greg Jensen
To now they're spending that all.
Speaker Greg Jensen
And they need to raise money in aggregate in the ecosystem.
Speaker Greg Jensen
In fact, by our estimates in 2027, AI capital needs are going to be larger than all the needs this year.
Speaker Greg Jensen
In the US corporate bond market.
Speaker Greg Jensen
Big deal.
Speaker Greg Jensen
And more's priced in.
Speaker Greg Jensen
Um, and so that leads us to more winners and losers than necessarily the straight line of winners that that we've had.
Speaker Greg Jensen
So those things make this situation a little bit more dangerous.
Speaker Greg Jensen
And so critical.
Speaker Jim Haskel
Thank you, Greg. Well, Bob, let's turn to you now because we've heard both the global outlook.
Speaker Jim Haskel
We've heard a deeper dive into all the dynamics into AI that we're seeing.
Speaker Jim Haskel
So, now, how do we think about this in terms of allocating capital in 2026?
Speaker Bob Prince
Getting to current actions.
Speaker Bob Prince
Uh, when I, you know, when I think about resiliency, diversification and agility are always key to resilience.
Speaker Bob Prince
To building a resilient portfolio, and today, I think diversification is crucial.
Speaker Bob Prince
Um, not only is it risk-reducing, but because of valuations.
Speaker Bob Prince
It has been return enhancing, we expect it actually to be that way.
Speaker Bob Prince
Continuing into the future.
Speaker Bob Prince
But four specific types of diversification to pursue.
Speaker Bob Prince
Number one is balance.
Speaker Bob Prince
Balancing exposure to growth and inflation.
Speaker Bob Prince
Because when you look at modern mercantilism, and you look at the AI revolution, the tech revolution.
Speaker Bob Prince
I mean, that could pop out to either inflationary or deflationary.
Speaker Bob Prince
It could pop out to to strong growth or weak growth.
Speaker Bob Prince
Right, in fact, Karen talked about, you almost have, you have both at the same time going on right now, right?
Speaker Bob Prince
And so balancing growth and inflation is the starting point.
Speaker Bob Prince
The second thing is geographic diversification.
Speaker Bob Prince
Um, geographic diversification is the only way to actually diversify risk premiums across, uh, across assets.
Speaker Bob Prince
Is you have to go across countries and capture the differences in economic cycles and monetary conditions.
Speaker Bob Prince
But also modern mercantilism and uh, the tech revolution are going to create massive differences.
Speaker Bob Prince
In outcomes for countries and sectors and companies.
Speaker Bob Prince
And so geographic diversification is really a no-brainer.
Speaker Bob Prince
We've talked for years about currency, right?
Speaker Bob Prince
And going back to the 90s.
Speaker Bob Prince
Uh, that um, understanding what is your risk neutral currency position.
Speaker Bob Prince
Uh, only if you understand your risk neutral currency position.
Speaker Bob Prince
Do you know if you're taking currency risk?
Speaker Bob Prince
And currency is a separable, independent source of return and risk in a portfolio.
Speaker Bob Prince
Know your risk neutral position, probably go to that.
Speaker Bob Prince
And only deviate based on uh, really a a clear view and the ability to execute on that view.
Speaker Bob Prince
Uh, again, balancing currency exposure in the last year has added 200 basis points.
Speaker Bob Prince
Relative to a concentrated position in dollars.
Speaker Bob Prince
And lack and it's last, and I think this is really unique to this environment.
Speaker Bob Prince
Is is thinking about diversification in terms of technology.
Speaker Bob Prince
And and specifically focusing on technology.
Speaker Bob Prince
When you look at, you know, some uh, heavily private market investors.
Speaker Bob Prince
They're underweight technology.
Speaker Bob Prince
When you look at some traditional asset allocations, they're overweight.
Speaker Bob Prince
And too concentrated in technology.
Speaker Bob Prince
Thinking specifically about technology and your AI exposure is really important.
Speaker Jim Haskel
Great, to all of our CIOs, Bob, Greg, Karen, thank you very much.
Topics:Bridgewater Associatesmodern mercantilismartificial intelligenceAI boomglobal outlook 2026capital allocationeconomic growthinflationgeopoliticsinvestment strategy
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