Deglobalization - Spring 2025

With tariffs being imposed by many countries across the world, there is a fair amount of discussion and concern about Deglobalization and supply chain disruptions. In our view, it is hardly a surprise as it has clearly been coming for years.

For us, Deglobalization is best viewed in the context of Brenton Woods and the resulting world trade system. That system being backstopped by the United States protection of the ocean shipping lanes for the 80 years following WWII. Deglobalization is anticipated by, and the reasons for it occurring are explained, in The Accidental Superpower by Peter Zeihan, released 11 years ago, and again in an updated version of that book, Disunited Nations. We recommend these books for a better understanding of the past 80 years of relatively free trade/Globalization (which can be viewed as beginning at Bretton Woods in 1944).

In addition, our view remains unchanged from December of 2024:
   1. Markets, tariffs, and politics will be volatile with Trump as President.
   2. The bad news tied to that volatility will be mostly over in 2025 and remain lower until perhaps 2027.
   3. If a United States tax bill passes in 2025 heading into the midterm elections, 2026 will likely be a year of less volatility and more positive political messaging from the Administration. This hard stuff in year one, followed by a positive year 2 is traditional Presidential politics 101.
   4. Trump may be difficult to predict and prone to comments that create uncertainty, but in the long run he will act rationally.

While volatility in our view is not risk, we do believe that often times volatility will increase risk. In addition, it is always worth remembering that the future is never completely predictable, and any predictions of the future are simply guesses that may or may not occur. That being said, it is our belief that the most likely result of the current volatility will be:
   1. A world better prepared for Deglobalization.
   2. Fairer trade relationships for the United States.
   3. The continuing decrease of the uncompensated involvement of the United States in things like safeguarding shipping lanes for all and being the world police force in areas of the world like the Middle East.

In the meantime, we at Valad Plus® are focused on using the current market volatility (up or down) to increase our 2025 returns relative to the S&P 500 for our clients.

4/28/25