Transcript: Reshaping of global supply chains opens up opportunities

The ‘safe haven’ premium

AK: The idea of the safe haven premium for U.S. Treasuries and the dollar is definitely under pressure, and the broad concept of U.S. exceptionalism is definitely evolving. You know, the dollar has been weak. 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. So U.S. exceptionalism is possibly shifting, but it’s not vanishing.

U.S. debt levels

AK: The U.S. debt burden is becoming a structural headwind. It does impact economic growth and it does impact investor confidence. You’re talking about record debt-to-GDP levels. The U.S. national debt surpassed $37.5 trillion. It’s exceeding 100% of GDP. It’s projected to reach over 150% by 2055. So this trajectory is definitely concerning for long-term fiscal sustainability and the potential of crowding out of private investments. Ultimately, this can impact tax policy. I think the U.S. government realized perhaps the impacts of DOGE (department of government efficiency) wouldn’t be what they expected. So now they’re stimulating to actually outgrow this debt. But I’d say the bottom line is, look, rising debt levels definitely complicate the macro picture. It reduces policy flexibility long term, and it makes it makes it harder for companies to invest.

The outlook for Europe, Asia and emerging markets

AK: The U.S. market does remain strong. A lot of the most innovative companies are there and, you know, the EPS growth for the S&P next year looks pretty strong. But you can expect international markets to perform well, driven by several things that are happening right now. There’s macro divergence, there’s positive policy shifts, a lot of them are coming from a cheaper valuation base. And you’re getting into a global, synchronous rate-cutting cycle. This is a supportive backdrop for risk assets globally. Historically, equities tend to do well in periods of rate-cut cycle, especially paired with economic growth. Europe is one area we are excited about. There’s been years of underinvestment and it’s coming off a pretty low valuation base. Investment flows are moving into Europe. One positive area in Europe is the idea of defense spending. It’s rising across the continent. Germany is stimulating and leading that CapEx growth. So Europe is one area that’s shown a lot of improvements. Japan? If you look at the Nikkei 225, it’s reached all-time highs. They’re benefiting from more corporate governance reform and strong AI-related CapEx. So that’s a market that is seeing policy tailwinds and a lot of global investor rotation. China, despite some geopolitical headwinds and perhaps weakness in the real estate market, it’s the technology sector that’s doing really well. Advancements with AI and DeepSeek and even industrial robotics, they’re a leader in physical AI adoption. And they have some of the highest installed rates in terms of industrial robotics. So, again, we expect strong relative performance from Europe, Japan and emerging markets over the next decade, especially as global monetary policy remains accommodative and there’s structural reform taking place in these in these parts of the world.

Where he’s finding opportunities

AK: 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. So I think it is creating distinct investment opportunities for us to find those companies that are able to adapt. I’d say there’s a three-pronged approach. What are the tariff winners who are strategically positioned, benefiting from protectionist policies. There are companies that are probably better insulated in terms of inventory scale and supply chain flexibility, meaning they can absorb cost pressures and maintain pricing power and perhaps even gain market share in a market like this. So that’s one area where we’d focus. The other area is identifying companies that are tariff neutral. Think about companies tied to the Internet. Perhaps those companies are not directly impacted by tariffs. And then lastly, I’d say which companies really show good sector resilience and pricing power. Which companies have the unique ability to pass-through the tariffs, pass-through prices. So I’d say that’s kind of where we spend a lot of time in looking at opportunities. So deglobalization, to summarize, it’s not just a risk, but it’s also a catalyst for us to strategically reposition the portfolios.

And finally, what advisors should bear in mind in the current moment

AK: This has been one of the most unique stock markets in history. But keep in mind, GDP growth has been strong. We are starting a global synchronous rate-cut cycle. There are stimulatory events happening. Think about the Big Beautiful Tax Bill, which means companies are paying less cash taxes. They have more money to reinvest. You have the idea of deregulation in the U.S. which could benefit banks. So we are constructive on 2026, both in the U.S. and globally. What I would say is, we do look at seasonality, and September and October are historically weak. So you can expect some volatility here [over] the next few months. But all else equal, we’re excited for the end of the year and 2026 as a whole.

Well, those are today’s Soundbites, brought to you by Investment Executive and powered by Canada Life. Our thanks again to Auritro Kundu of AGF Investments. Visit us at investmentexecutive.com, where you can sign up for our a.m. newsletter and never miss another Soundbite. Thanks for listening.

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