To be a successful investor, it’s important to look beyond individual asset classes and consider how powerful, long-term economic shifts – like those we’re seeing in geopolitics, technology and capital markets – could reshape the investing landscape. Although these shifts typically unfold over years or even decades, they can reveal where future growth may emerge and expose potential risks.

That’s the focus of this episode of Beyond the Portfolio, the final instalment in BMO’s Outlook Series. In this episode, Mike Miranda, President, BMO Family Office and Head of Investments, BMO Private Wealth, sits down with Dan Phillips, Chief Investment Officer for U.S. Wealth Management, and Carol Schleif, Chief Market Strategist, BMO Private Wealth, to discuss three themes that help shape how BMO formulates its capital markets assumptions. Here are the highlights.

According to Dan Phillips, international institutions such as the United Nations and the World Trade Organization, that emerged following the Second World War, are less equipped for today’s geopolitical reality. Phillips doesn’t see globalization ending so much as being restructured around new partners and priorities.

As part of that shift, manufacturing is returning to North America, helped by automation and robotics that have reduced the labour-cost advantage of offshore production. The U.S. and China will dictate most of the terms of this new order, he says, with Europe lagging behind as it tries to catch up on both technology and military spending. “It really does lead to a focus on the U.S. and China, with other countries being useful partners.”

Carol Schleif says markets typically look past geopolitical headlines, but these shifts will be harder to ignore. Supply chains are being restructured, trade relationships are being renegotiated, and new tariff regimes are adding costs that companies will have to absorb or pass along. The transition to regional manufacturing might eat into margins, she says, but automation could soften the sting. “There are a lot of moving parts there.”

AI has dominated headlines, but Phillips says the opportunity is much wider than many investors realize. One critical area to watch is infrastructure supporting AI. Massive investment in electricity and water for cooling is needed to avoid bottlenecks that will shape how quickly adoption happens. Governments are also getting involved, with the U.S. investing directly in technology companies. “It’s a bit of a shift of the U.S. economic model, which was always a lot more laissez-faire, free market capitalism, and perhaps taking on a few characteristics of what you could call state capitalism,” he says.

Schleif says investors need to look past the AI hype and focus on how companies are using the technology. She noted that there have been interesting applications in logistics, pharmaceuticals, and robotics, with Amazon passing the million-robot mark last year. Quantum computing isn’t commercially viable yet, but major players, including Nvidia, are already building processing units for when it is. “There are many different segments of this industrial revolution,” she says. “We really think it necessitates investors taking a step back and reconsidering everything, including how companies are using and benefiting from AI and what the competitive landscape looks like.”

Emerging technologies are letting investors slice and dice risk and opportunity in new ways, Schleif says, pointing to the growing popularity of prediction markets. These markets, which let investors wager on specific events, have gained enough legitimacy that the New York Stock Exchange (NYSE) and the Chicago Board Options Exchange (CBOE) have taken ownership stakes in platforms that offer them.

Phillips sees prediction markets providing real-time data on how investors are pricing specific outcomes. The markets are still small relative to treasuries or heavily traded stocks, but they’re growing quickly. Over time, hedge funds could build forecasting strategies around them that generate returns uncorrelated to traditional portfolios. “Any information we can get on how the markets are pricing specific events is helpful for us when we’re trying to set our asset allocation policy,” he says.

Schleif says her biggest concern is the pace of change. Markets, products and investment vehicles are evolving faster than regulators can keep up and investor enthusiasm can often run ahead of reality. That creates risk, particularly around liquidity. “You think you have liquidity until you try it out and you don’t,” she says.

For Phillips, the real risk is geopolitics. Competition with China has pushed both economies to innovate, but he worries about what happens when tensions run too high and there’s no one to step in. “In today’s geopolitical environment, the ref is less likely to be found,” he says.