Geopolitics rarely announces itself cleanly in a portfolio. It arrives through currencies, bond yields, and equity flows long before it shows up in headlines. In a sweeping new Gavekal Research note, On Common Myths1, Louis-Vincent Gave argues that the foundational stories nations tell about themselves are not merely cultural artifacts. They are live wires running through global capital markets, and right now, several of them are sparking.
Gave opens with an unlikely guide: the French Resistance. The story of Maréchal Leclerc de Hauteclocque, an aristocrat who crossed every class and ideological boundary to fight for a free France, serves as an entry point into one of the most consequential questions in macro investing today. Why do some nations cohere under pressure while others fracture? And more to the point: what does that mean for where money flows?
The answer, Gave contends, lies in shared national narratives. "Because countries' foundational myths do matter in terms of the stories countries tell to themselves," he writes. "And right now, a number of foundational myths are under attack; with perhaps some important investment consequences."
The American Contradiction
The United States has long traded on a self-image of generosity. Americans give more to charity per capita than any other major nation, approaching US$600 billion last year, or roughly 2.1% of GDP, compared to 0.2% to 0.5% in most of Europe. That image of the benevolent hegemon has anchored foreign capital flows into US markets for decades.
But the myth is fracturing. Gave identifies a sharp disconnect between that self-image and a foreign policy that, in his words, carries "a violent, predatory, turn." He observes that, despite a dominant position in artificial intelligence, "US equities have nonetheless underperformed all major markets since President Donald Trump's inauguration; with the exception of China." US Treasuries have similarly lagged every major bond market except Japan's. And against all conventional logic, the US dollar has weakened even as long-dated yields have risen.
Layering on the valuation picture, Gave deploys a variant of the Buffett Indicator, comparing US market capitalization not to GDP but to M2. The chart shows the US at historical extremes relative to every other major market. Against that backdrop, the direction of foreign capital is not hard to envisage. "It seems much more likely," Gave concludes, "that foreign investors will continue to increasingly look at home to redeploy domestic savings."
Germany, Japan, and the Turkish Scenario
Germany and Japan rebuilt their post-war identities around industrial excellence. That myth of precision and reliability drove the relentless rise of the Deutschmark and the yen through the 1970s. It is why Jacques Delors famously quipped that "not all Germans believe in God, but all Germans believe in the Bundesbank."
That myth is now under stress. In Gave's assessment, "the industrial dominance of either country can no longer be taken for granted." China has not merely caught up in autos, machine tools, and robotics; it has leapfrogged. The resulting tension between embracing China or rejecting it creates deep fissures within both countries. Equity markets in Germany and Japan have held up, but Gave flags a warning: their performance has come at the expense of collapsing bonds and weakening currencies. "True equity bull markets usually occur with rising exchange rates and falling bond yields. Not collapsing exchange rates and rising bond yields."
Canada's Accidental Opportunity
Canada's foundational myths, Gave notes, are modest by global standards: loyalty to the Crown, bilingualism, and a comparative gentleness toward Indigenous peoples relative to the US. Yet Trump's trade confrontation has crystallized these modest myths into something more economically consequential. If the response is capital repatriation funding domestic infrastructure, Gave sees a scenario where "the Canadian dollar should strengthen even as Canadian interest rates remain much lower than American interest rates."
China's Phoenix and France's Shovel
China's foundational myth centres on civilizational resurrection. The "century of humiliation" justifies capital controls and state intervention but also generates enormous domestic savings discipline. Chinese bonds continue to outperform. The renminbi strengthens by roughly 50 basis points per month. The embedded suspicion of foreigners makes China "somewhat uninvestible" for external capital, yet for domestic savers, the story is cohering.
France, by contrast, is "choosing to show to the world that, at the bottom of every hole is a shovel that can be used to keep digging an even bigger hole." Street riots compound a confluence of fiscal, economic, inflation, immigration, and social crises. Gave's diagnosis is blunt: France looks "increasingly like an emerging market," borrowing in a currency it cannot print, while a political vacuum prevents honest reform.
Gave's conclusion maps the myth landscape directly onto markets: common myths are working positively in Canada and China, neutrally in the UK, Japan and Germany, slightly negatively in the US, and "very negatively in France." The signal, he argues, is already visible in Asian currency and fixed income outperformance against European and US benchmarks.
5 Key Takeaways for Advisors and Investors
- US exceptionalism is repricing. The foundational myth of the benevolent US hegemon is eroding among foreign investors, and the data confirms it: US equities and bonds have underperformed most major markets since January 2025 despite a surging AI sector.
- The Buffett Indicator has a valuation warning for US allocations. US market cap relative to M2 is near historic extremes, an outlier versus every other major economy. At this stage, the risk-reward of US overweight positions deserves reassessment.
- Canada may be the quiet surprise. Trump's pressure on Canadian foundational myths could, counterintuitively, trigger capital repatriation and domestic infrastructure spending, producing a stronger loonie and outperforming domestic assets.
- Germany and Japan equity gains carry a hidden cost. Both markets have run on weaker currencies and rising yields, a dynamic Gave explicitly flags as unsustainable. Advisors should scrutinize unhedged developed-market allocations in these regions.
- Asian fixed income and currencies deserve fresh attention. Gave's macro scorecard points to continued outperformance for Asian bonds and currencies as foreign capital finds more compelling myths, and better risk-adjusted returns, closer to home.
Footnote:
1 Gave, Louis-Vincent. "On Common Myths." Gavekal Research, 20 Oct. 2026, https://research.gavekal.com/documents/13578/On_Common_Myths.pdf.
