Daniel Graña: Have we seen the end of globalization, and what does that mean for investors? I certainly believe we have, partially because of populist pressures in developed markets, partially because of COVID and the way it’s evolved in China, and partly because of geological considerations, we have seen peak globalization. What does that mean, and what does that translate into?

Deglobalization basically means the fragmentation of end markets, and it also means the fragmentation of supply chains. In terms of the fragmentation of end markets, it’s going to be harder and harder to bring intellectual property from one part of the world to another. And so what that means is that there are going to be companies in China that are going to be championed by the government to sort of ease out, push out, multinationals. That has negative implications for multinationals selling into China. But of course that also means that, with policy support, some of these companies will do quite well in this new deglobalized world.

And the second consideration is fragmentation of the supply chain. When China locked down because of COVID, I think it served as a reminder that you couldn’t depend [on having] 100% of your supply chain in one country. And so, at the end of COVID, we saw many countries look at China plus-one strategies, looking to diversify away the supply chains. But that has also accelerated now that we’ve had deglobalization through geopolitical considerations. And so now we’re beginning to see some onshoring and friend-shoring, which does benefit emerging markets, more specifically Vietnam, Indonesia, India, and Mexico are four clear beneficiaries of this deglobalization or this diversification away from China. We’ve seen a lot of announcements of foreign direct investment in Mexico to access the U.S. end market. The U.S. government itself has passed some laws to sort of encourage onshoring of technology supply chain.

So there are beneficiaries within the emerging markets, but I would like to highlight that deglobalization carries with it a cost. If you’re no longer investing in the lowest marginal cost producer of goods and services, it’s necessarily inflationary. And it’s either, companies will have to pass on a much higher cost, or the government is going to have to subsidize that move in the supply chain. So deglobalization, moving from that world where we had lived in and seen all the end-consumer benefits of manufacturing in the cheapest places to something that’s a lot more different, a lot more fragmented, it does have some issues. But I think within emerging markets there’s some great opportunities to take advantage of that deglobalization.