SIBONISO NXUMALO: Changing world order: emerging markets are now the adults in the room

US hedge fund manager Ray Dalio’s “The Changing World Order” focuses on the idea that the world moves through repeating cycles of debt, power and renewal. For me, it was not in the halls of empire that I was exposed to these serial cycles, but in the messy, exhilarating world of global emerging markets.

What I experienced as an emerging markets investor was not peripheral to the global markets story; it was a preview. The turbulence that once defined the developing world has now spread to the developed one.

The world Dalio described was already forming on the horizon; as emerging markets investors we were just standing closer to its front line.

A threat to the global order

In 2011-18, as part of a team managing a long-only emerging markets equity fund, we moved through cities that were rewriting their own futures. From the traffic-choked ambition of Mumbai, the industrial pulse of Shenzhen, the political theatre of Brasília, right through to the vibrant optimism of Johannesburg. Every city was its own experiment in progress, rising, stumbling, reforming and reinventing.

In these emerging markets confidence could swiftly turn to panic, capital could flee at the first hint of political turmoil and extraordinary companies emerged strongest from chaos. The same forces Dalio wrote about — debt, inequality, conflict and the erosion of trust — were already visible, not in textbooks but on the ticker tape and trading screens we lived by daily.

During this period the West set the tempo. We thought in dollars, measured success in basis points off the US yield curve and interpreted global risk through the lens of Wall Street. Emerging markets were seen as the outer orbit. But since then the roles have reversed. The frontier has become the centre and Donald Trump’s targeted attacks on the Brics+ bloc indicate the threat they have become to the global order.

After the rise of political risk in 2016 with Brexit, Trump and populism in Europe, the assumption that advanced economies were stable began to crumble. Developed markets started behaving like emerging ones, while many emerging markets were maturing, reforming and stabilising.

Characteristics once associated with emerging markets — fiscal recklessness, policy uncertainty, populist politics — are now prominent in the developed world. The distinction lies not in geography but behaviour. The question is whether an economy is disciplined, adaptable and capable of reform.

The end of the easy money

With the US having hit its highest debt level yet, now more than $36-trillion, debt has become the defining feature of the Western model.

Source: Bloomberg

For four decades investors rode a tailwind of globalisation and leverage; those tailwinds are now headwinds. Capital is more expensive, geopolitics matters again and the assets once considered safe no longer offer the same protection. The US Federal Reserve, which once absorbed shocks, is now a source of volatility.

Global peace is also in question. After the Cold War Western nations enjoyed what economists called the peace dividend. They spent less on defence and more on consumption, technology and comfort. That era has once again ended. The wars in Ukraine and the Middle East have reminded us that peace is fragile and that energy, supply chains and territorial security have strategic value again.

Meanwhile, China has asserted itself as an economic and military power. Its Belt & Road Initiative, technological leadership and growing influence in Brics+ signal a deliberate reshaping of the world order. Trade wars, sanctions and tariffs, including those proposed again by Trump, are not just political theatre; they are instruments of competition.

Rise of the East

In Beijing in 2017 what struck me was what was missing. No Google, Facebook, Amazon — only Baidu, Alibaba and Tencent. China had built a parallel digital universe. In addition, the world’s most valuable tech companies may still be US-listed, but the foundations of their dominance — semiconductors powering AI — are manufactured largely by Taiwan Semiconductor Manufacturing Company (TSMC). The tension across the Taiwan Strait is therefore about control of the technological foundations of the future global order.

The East now writes much of the global script. India has become the world’s most populous nation and one of its most dynamic economies. China remains a manufacturing and financial powerhouse. Gulf states are deploying capital across Africa and Asia. Meanwhile, the West shows signs of fatigue: high debt, political polarisation and social division.

In gold we trust

The rise in gold prices is not about jewellery demand. It is about trust or the erosion of it. Central banks in China, India and Turkey are buying record amounts of gold as they diversify away from the dollar and question the sustainability of Western fiscal policies.

We are moving from an age of financial wealth to one of tangible wealth. When confidence in paper assets weakens, investors turn to things that are real: energy, commodities, productive land and gold. For a century financial assets have outperformed real ones. That pendulum may now be swinging back.

South Africa stands at the crossroads of this global realignment. As a resource-rich member of Brics+ it benefits from the East’s appetite for metals, minerals and food security, but its financial markets remain deeply connected to Western capital. That duality can present strength and vulnerability.

The world may reward producers of real assets, but only those that deliver them consistently. South Africa’s role in the energy transition through platinum group metals, copper and manganese positions it well, provided we maintain policy stability and institutional strength.

Gold’s resurgence captures the mood of the moment. Its rise is not merely an inflation hedge or a safe-haven trade; it is a reflection of the world’s unease with the dollar-centric financial order. The ascent of gold is, in many ways, a mirror of doubt, a vote of caution against debt-fuelled prosperity and monetary excess and a signal that scarcity, credibility and discipline are once again being repriced.

From reliance to resilience

It is often said that little happens in a year, but a decade can change everything. Now the question is, how far will this changing world order go? What will money mean when trust itself begins to fade? Where will the debt settle, what will security cost, and how will value be measured in a world learning to prize resilience over reach?

We invest for the long term, which is another way of saying we invest in time itself. The task of investors is to look beyond what moves now and see what is becoming inevitable to sense the next tide before it crests. Perhaps 10 years from now, we will look back on this moment and realise that the next great shift had already begun, quietly, invisibly, yet in plain sight.

Nxumalo is chief investment officer at Old Mutual Investment Group.