Investing in an Emerging World Order. Part 1

In the first installment of our three-part series on global supply chains, Portfolio Managers Peeyush Mittal and Inbok Song discuss why and where trading networks and manufacturing hubs are changing and how it’s impacting the international investment landscape.

Key Takeaways

  • In the pre-pandemic world, profit motive and ‘just-in-time’ classical economics were often the decisive drivers for companies, helping to fuel a massive globalization movement aided by low-interest rates.
  • The pandemic, war, inflation and geopolitics have since disrupted and rattled supply chains around the world. Political tensions have also incentivized companies to rethink their relations with and reliance on China.
  • Amid these changes, certain emerging markets like India, Vietnam, Mexico and the Philippines have become key destinations for companies. Other markets like South Korea and Taiwan are reshaping their supply chains to diversify and navigate geopolitical strains between the U.S. and China.

The world today—characterized by a surprisingly robust U.S. economy, high interest rates and geopolitical tensions, and sweetened with pockets of exuberance like artificial intelligence—can be challenging to decipher.

One way to try and understand it is through the considerable changes occurring in global supply chains: those markets and companies that have moved rapidly into the electric vehicle (EV) and renewable space; those that have seized opportunities resulting from U.S. sanctions on China’s tech and semiconductor industries; and those markets that are increasingly offering production alternatives as companies navigate changing commodity and operational costs and geopolitics. These moves are popularly (and variously) described as offshoring, nearshoring, reshoring and de-risking.

In this series, we look at the emergence of these trends, their potentially lasting impact and what they mean for investors.