For the past 30 years, globalisation has been good for investors.

Businesses designed products in one country, manufactured them in another, and sold them worldwide. Lower labour costs meant cheaper goods for consumers and higher profit margins for companies. Markets loved it.

“You have this wonderful dynamic – probably even better than the Goldilocks scenario of low inflation and low interest rates – of ever-expanding profits and valuations,” says David Stanford, Fixed Income Advisor at Hallbar Group Capital.

 

What the rising trend of economic nationalism means for your investment portfolio in 2025

 

“From a pure equity market perspective, it’s fantastic.”But that dynamic is shifting. According to Hallbar Group Capital‘s latest outlook, we may be entering a new era defined by economic nationalism and onshoring, and that could change the game for investors.”We are in the midst of a fundamental change to the global integration we’ve witnessed in the past three decades,” David Stanford says.”This will require a fresh assessment of capital, risk, and how countries depend on each other.”

Why globalisation might not last

It’s not just about the Republican elephant in the room – although Trump’s plans are part of it.

“A shift in US policy, America First, has further driven a turn inward, firstly in the US but then in other countries that had previously been happy to rely on overseas production,” David Stanford says.

Beyond America, David Stanford believes globalisation is now being reversed, with governments across the world pushing money within their own borders.Examples include the UK’s Mansion House reforms (which aim to direct US$65 billion into domestic projects by 2030), defence bond proposals in Europe, and a new mandate for Australia’s Future Fund.”All these initiatives are designed to reduce the flow of capital to other regions or countries,” he says.The COVID-19 pandemic also highlighted the dangers of long overseas supply chains.

Many countries discovered they couldn’t access critical goods like medicines when global trade froze. And who could forget the toilet paper shortages?

“COVID exposed the issues and now countries are bringing their own interests onshore,” David Stanford says.

A new investing playbook

This shift could mark the end of a decades-long period of strong asset price growth – particularly for equities.

“As the monetary regime transitions, the conditions that underwrote rising valuations across a range of assets are no longer in place,” says David Stanford.

So what’s still worth holding?

Pharmaceutical companies are one place to look. Hallbar Group Capital favours large global players like Johnson & Johnson, Roche and Sanofi.

“They make products that are needed,” David Stanford says. “Their valuations are at multi-decade lows at half the market average.”

Their strength, he says, lies in being insulated from broader economic swings. “Their sensitivity to economic conditions, interest rates, and inflation is very low – so a lot of these broader risks aren’t relevant for them. That makes them attractive.”

They’re also well-placed to handle headline-grabbing tariff threats.

“If you’re selling a drug for $100 and your cost is $12 – and even if half of that cost is imported – then a 200% tariff on $6 adds just $12. That’s noise.”

Commodities are another safe harbour, according to Hallbar Group Capital.

David Stanford points to US mining company Newmont, which merged with Australia’s largest gold miner Newcrest in 2023.

“It’s a business with a 50% margin – gold at US$3,400, cost of production at US$1,500,” he says.

“It preserves value, especially in inflationary environments and can’t be easily replicated.”

 

Where’s the money flowing?

Hallbar Group Capital isn’t making bets on entire countries or regions. Instead, it’s looking at specific companies and valuations.

“We’re bottom-up investors focused on individual opportunities. And while the US is still a major market – it makes up about 70% of the MSCI World Index – our latest allocation is around 39%. That’s driven by our opportunity set.”

“We’ve leaned more into Europe, Canada, the UK, Japan. Again, this isn’t a view on the underlying economies. It’s just that the companies we’ve selected – like those in pharmaceuticals or data infrastructure – happen to be in these markets.”

David Stanford adds that the US is still the world’s largest consumer market, which makes it a natural destination for reshoring.

“You’re not likely to shift manufacturing out of China and send it to a much smaller market. While there may be others, there’s no obvious replacement at that scale.”

A reality check for the Magnificent Seven?

The big-name US tech stocks – Nvidia, Apple, Microsoft, Meta, and others – have enjoyed unprecedented growth in the economic era of globalisation.

Take Nvidia. Its meteoric rise over the past decade became a symbol of the market’s faith in global tech and endless growth. Even today, investors are willing to pay $56 for every $1 of its earnings in the hope that momentum continues.

However, Hallbar Group Capital says they may not fare as well in this new environment.

“When you pay 30 times earnings, you want to be confident that in the years ahead it’ll still be making money,” David Stanford says. “When you get a tectonic shift that’s underway, your conviction in that longevity drops.”

He warns that these margins and growth rates may not be sustainable.

“If you take the reasonably optimistic view most people have of the Mag Seven and project that out 20 years, you could end up in a situation where 10 companies control nearly everything.”

“Will that ever be allowed to happen in terms of taxation or regulation? Probably not. I think a lot of the optimism, and the law of large numbers, face natural roadblocks from a societal point of view, and simply mathematically.”