DAVOS, Switzerland

The previous order of how the global economy operated, neamely “the Washington consensus is behind us,” since geopolitics and security added a new layer, as the global economy now seeks a new order to operate through, S&P Global Ratings global chief economist told Anadolu.

Paul Gruenwald, speaking on the sidelines of the 56th annual World Economic Forum (WEF) held in Davos, Switzerland, stated that topics like “trust in the system, trust in the major countries, and companies” are some of the most talked-about items at the WEF this year, as nations and firms are trying to adapt to changing supply chains, trade routes, and financial changes.

“I think the old system, which was based on the idea that markets are good, free trade is good, free flow of capital is good, (a) kind of a borderless world (…) Now we have a lot of security and geopolitical concerns that are overriding trade,” he said.

“We're trying to find a new order, but I think navigating those risks, building in redundancies, being more opportunistic in who we’re partnering with, hedging our exposures—those are some of the big things. (…) The old order was kind of underwritten by the US as the benevolent hegemon, and I think that role is evolving,” he added.

Instead of seamless order, ‘patchwork of different combinations’ may come to fore

Gruenwald stated that it is hard to tell what the new order will look like, pointing at Canadian premier Mark Carney’s speech in Davos about the need for middle powers to rise to tip the scales.

He noted that the US and China are competing in many areas as two superpowers, adding that the new order “will not be a seamless global order,” but “a patchwork of different combinations depending on the issue.”

He mentioned that these combinations could be in trade, security, or other areas, but some countries still want to preserve some elements of the old order.

Gruenwald stated that, moving forward, geopolitical issues and security-related developments have become decisive in the economy, even in the US, as the government started to take a more active role in companies, warning them not to buy back shares and instead to invest in the economy.

In this climate, “it is no longer sufficient to just be a strong macroeconomist,” he said.

“We all need to be multidisciplinary—we have to think about geopolitics, we have to think about energy, and we have to think about credit markets and unconventional sorts of ways the financial system works,” he noted.

“We have to be able to put all of that together—I think many people have been on this learning journey where you can't really be too specialized these days,” he added.

High valuations are under microscope

Gruenwald stated that the global economy is expected to grow 3.2% in 2026, saying it is not so bad considering the current challenges, but the situation for each major economy is a different story.

“The US is coming out of the induced trade effects of the tariffs, Europe is trying to gain some strategic autonomy, and China is trying to rebalance and fight property market and other deflation,” he said.

He noted that data centers, artificial intelligence (AI) investments, and “relatively low energy prices” are some of the factors supporting the global economy, but on the risk side, the markets are closely monitoring geopolitical developments and high valuations.

Gruenwald emphasized that stock valuations are quite high and the market is riddled with significant optimism, but there is still hesitation to call the rapid rise in AI stocks a bubble.
“I don't think everybody's going to get through this necessarily unscathed and we will have some winners and losers,” he added.