Ray Dalio calls it a "long ideological war." Mark Mobius sees little hope for a quick resolution. And Stephen Jen says we're witnessing the start of a 15-round fight.
As the U.S. and China clash over everything from trade to technology, some of the biggest names in investing are bracing for a protracted superpower conflict and adjusting their portfolios accordingly. Mobius, for instance, is avoiding shares of Chinese exporters and buying companies that sell to domestic consumers.
"This contest will be a drawn-out process that will likely last our careers," said Mr. Jen, a former economist at the International Monetary Fund and Morgan Stanley who now runs Eurizon SLJ Capital, a hedge fund and advisory firm. "We as investors and analysts need to pace ourselves, and try to not just follow the latest news. We need to understand the economics and the cultural differences."
Bets on an easing of tensions that helped propel stocks toward record highs just four weeks ago are quickly unwinding.
Global equities lost $4 trillion of value this month, while U.S. Treasury yields plunged to the lowest level since 2017 as Donald Trump's administration raised tariffs on Chinese goods and slapped Huawei Technologies Co. with potentially devastating supply curbs. Xi Jinping responded by calling on his compatriots to join a "new Long March" and Beijing geared up to weaponize its dominance of rare earths — key ingredients in smartphones and electric cars.
For Mr. Dalio, billionaire founder of Bridgewater Associates, the conflict goes well beyond a trade war. As China emerges as a world power capable of challenging the U.S., the countries will clash in "all sorts of ways" because of different approaches to government, business and geopolitics, he wrote in a series of posts on LinkedIn this month that didn't mention his investments.
"They can't negotiate these more fundamental issues," wrote Mr. Dalio, whose firm oversees about $160 billion and has offices in Westport, Conn., and Shanghai.
Even if Messrs. Trump and Xi manage to hammer out a trade deal (they're expected to meet at the G20 summit in June), China and the U.S. will keep clashing over issues like technology for the foreseeable future, according to Mr. Mobius.