Reshaping of global supply chains opens up opportunities

Despite protectionist policies and geopolitical tension, there are opportunities to be found among companies that can adapt, says Auritro Kundu, vice-president and portfolio manager at AGF Investments.

“With deglobalization and rising tariffs, you’ve seen a reshaping of global supply chains. You’ve seen a change in pricing dynamics. You’ve seen a change in competitive advantages,” he said. “It is creating distinct investment opportunities.”

Kundu said he looks for companies

• that are strategically positioned to benefit from tariffs and protectionist policies;
• whose products and services bypass tariffs entirely; and
• that show good sector resilience and pricing power.

“We spend a lot of time looking at opportunities,” he said. “Deglobalization … is not just a risk, but it’s also a catalyst for us to strategically reposition the portfolios.”

In a wide-ranging conversation on the Soundbites podcast this week, Kundu said U.S. exceptionalism is under pressure in the current climate and is shifting with the movement of capital investment to other countries. But it is not going to vanish overnight.

“The U.S. market does remain strong. If you look at the S&P 500, it has some of the highest operating margins in the world,” he said, adding that American companies are innovation leaders with EPS growth that is expected to remain high next year.

Kundu said the idea of a safe haven in U.S. Treasuries and the U.S. dollar is also evolving.

“The dollar has been weak,” he said. “But keep in mind the dollar is entrenched, in terms of being the dominant reserve currency in the world. And there really is no alternative right now.”

More concerning to the notion of U.S. exceptionalism, however, is the growth of the U.S. debt burden, which is becoming a structural headwind. Uncontrolled government spending has the potential to spur interest rate hikes, he said, which would, in turn, imperil private sector infrastructure spending, research and development, and labour markets.

“Rising debt levels definitely complicate the macro picture,” he said. “It reduces policy flexibility long term, and it makes it makes it harder for companies to invest.”

Kundu described current conditions as leading to “one of the most unique stock markets in history,” shaped by a convergence of macro shocks and structural shifts that include Covid-related tightening followed by the AI boom.

“There’s a confluence of rate transitions, labour distortions, trade shocks, technology disruptions, which is making this one of the most unique and complex and, I’d say, interesting times in the stock market.”

He said he’s constructive about the balance of the year and going into 2026, particularly given the broadening of domestic markets and the U.S. government’s ongoing moves to lower corporate taxes and reduce regulatory burdens.

“GDP growth has been strong. We are starting a global, synchronous rate-cut cycle. And there are stimulatory events happening,” he said. “[Earnings are accelerating] not just in the S&P, but in the Russell 2000 or even in the S&P mid-cap 400.”

He also expects international markets to perform well, driven by a global synchronous rate-cutting cycle, macro divergence and positive policy shifts.

He’s particularly encouraged by investment flows into the European defence industry, and Germany’s continent-leading capex growth. Japan’s Nikkei 225 is also showing strength, reaching all-time highs spurred by corporate governance reform and strong AI-related capex. And despite some domestic problems, China is showing strength in the AI-related technology sector.

“So we are constructive on 2026, both in the U.S. and globally,” he said. “We expect strong relative performance from Europe, Japan and emerging markets over the next decade.”

* * *

This article is part of the Soundbites program, sponsored by Canada Life. The article was written without sponsor input.