Highlights:

• Globalization was the trend for many decades
• The shift away from Globalization has effects on investing and the types of companies that might benefit in this new world
• Over time, our investing ought to reflect and be mindful of these trends

 

For as long as I have been working, and prior to that in school, the concept of “globalization” was the almost universal consensus belief for the World. I wish I could remember the name of my fantastic grade 11 Geography teacher who is the first person I can recall teaching me about this.

 

For numerous reasons: including the effects Covid had on countries (and all of us), we have all become more aware of how important having local supplies has become. Recall the mad rush on toilet paper for instance, as people worried that we would run out. While the toilet paper hoarding was folly, the world is at an inflection point. After decades of close trade ties and economic progress, globalization is being unwound. With trade relations becoming more fragmented and the potential for a great power rivalry between the U.S. and China.

 

From an investment perspective, it’s not a stretch to believe that increased “coordination” is going to happen in the West, much along the way it has happened in countries with large populations and resources, like China and India.

 

This chart is an eye-opener. Traditional powerhouses like the U.S. Japan, Germany, and other European countries are falling behind these larger countries in terms of growth and wealth.

 

From an investment perspective, this shift away from globalization will likely take place over the years. I believe the long-term trend toward a more fractured world order argues for rethinking how one views country and industry exposures in investment portfolios. Of course, I can’t recommend specific stocks in a post, but a number of strategically important industries seem poised to benefit.

 

Here are some of the “local” sectors that stand to benefit:

 

Such changes in the West and outside of the West could boost industries that are geared toward sovereign development:

 

• Advanced technologies, including semiconductors and artificial intelligence
• Cybersecurity
• Critical minerals and rare earths
• Energy transition technologies
• Water resource technologies
• Select industrial and infrastructure technologies
• Military and space equipment
• Advanced health care, including biotechnology and life science

 

No sports predictions this week, but did want to highlight that it is our awesome associate Avril McAmmond’s birthday on Monday: I predict she will perhaps be doing some late-night celebrating! I am grateful for all she does for me, and all of our clients.

 

Have a great weekend!