The Most Dangerous Assumption Is the Old World Still Exists
Ray Dalio, the founder of the world’s largest hedge fund, Bridgewater Associates, recently wrote in It's Official: The New Order Has Broken Down: The post-1945 world order “has broken down” and we are entering a new era of great power conflict and rule-by-power rather than rule-by-law. In his framework, this is Stage 6 of the Big Cycle—when internal disorder and external disorder reinforce each other and the dominant power is challenged by a rising one.
This is not a prediction of war. It’s a regime description.
For nearly 80 years, capital markets operated inside a relatively stable geopolitical container. The United States was the dominant power. The dollar was the unquestioned reserve currency. Trade expanded. Capital moved freely. Conflicts were mostly contained within institutions like NATO, the IMF, and the UN.
Dalio’s argument is that this container is cracking.
When leaders openly say “the old world is gone,” that’s not rhetoric. It’s recognition that the rules are shifting. The question isn’t whether the world is ending. It’s whether the assumptions embedded in portfolios still match reality.
The misconception
The common reaction is binary: either dismiss it as alarmism or assume it means imminent global war.
Both miss the point.
Historically, before shooting wars begin, there are economic wars—tariffs, sanctions, export controls, asset freezes, capital restrictions. Dalio outlines five types of conflict: trade, technology, capital, geopolitical, and military. Military conflict is last, not first.
Most investors anchor to the last 30–40 years and assume globalization, capital mobility, and U.S. dominance are permanent features. They aren’t. They were features of a specific phase in the cycle.
First principles
When a dominant power weakens relative to a rising power, friction rises. That friction doesn’t start with tanks. It starts with tariffs, semiconductor bans, currency pressure, and financial sanctions.
We’re already seeing:
– Trade fragmentation – Technology restrictions – Weaponized capital access – Increased fiscal strain in major economies – Populist political cycles internally
Dalio’s larger point is structural: internal debt cycles, internal political cycles, and external power cycles tend to peak and deteriorate together.
That clustering is what changes regimes.
The risk to capital
The biggest portfolio risk is not volatility. It’s regime mismatch.
If the world is shifting from a rules-based order to a power-based order, then:
Long-duration assets dependent on stable inflation and falling rates may behave differently. Cross-border assets carry sanction and capital control risk. Currencies can be weaponized. Debt can be inflated away if fiscal pressure escalates.
In prior late-cycle conflicts, governments financed stress through debt expansion and money creation. That historically impaired the real value of nominal claims.
That doesn’t mean “sell everything.” It means recognizing the geometry of risk may be changing.
The ASYMMETRY® perspective
Regime shifts increase dispersion. Dispersion increases opportunity—if downside is defined.
Periods of geopolitical fragmentation tend to produce:
Higher volatility Faster trend shifts More policy-driven market moves Greater divergence between asset classes
That environment rewards flexibility, optionality, and convexity. It punishes static allocation and overconfidence in a single macro narrative.
If power is becoming more important than rules, then capital preservation must become more important than optimization.
The goal is not prediction. It’s preparedness.
Boundary conditions
Dalio’s framework does not guarantee war. Great powers can negotiate. Win-win outcomes are possible if leaders respect red lines and manage escalation.
Cycles can extend. Declines can be gradual. Disorder can remain contained within economic competition.
But ignoring the shift because “markets are at highs” is not analysis. It’s anchoring bias.
Implications for families with meaningful capital at stake
If you’ve built a business, exited at a high multiple, or accumulated substantial assets, your risk isn’t missing the next 5% upside. It’s permanent impairment from a structural break.
The priority in a late-cycle geopolitical environment is:
Defined downside Liquidity awareness Return drivers that don’t rely solely on disinflation and globalization Exposure to real assets and flexible strategies Avoiding concentration in a single currency, policy regime, or duration bet
In simple terms: own resilience.
Dalio’s message is not fear. It’s cycle awareness.
World orders rise, peak, and change. That’s history, not ideology.
The most dangerous moment in any cycle is when investors assume the current regime is permanent.
Asymmetry in this environment isn’t about predicting conflict. It’s about structuring portfolios so that if disorder rises, the downside is defined—and if stability persists, the upside remains open.
That’s how you navigate a changing world order without becoming its casualty.
Mike Shell is the founder and chief investment officer of Shell Capital Management, LLC, a registered investment adviser. He serves as portfolio manager of ASYMMETRY® Managed Portfolios, a separately managed account program with trade execution and custody provided by Goldman Sachs Custody Solutions.
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