COLABORADORES
Kim Catechis
Investment Strategist,
Franklin Templeton Institute
Karolina Kosinska, CIPM
Analyst
Franklin Templeton Institute
A global system under strain
After enduring a prolonged and unprecedented series of shocks, the global economy appeared to have stabilized, with steady yet underwhelming growth rates. However, the landscape has changed as governments around the world reorder policy priorities and uncertainties have climbed to new highs.”
For decades, global supply chains have driven efficiency and resilience in global trade, benefiting consumers by providing a variety of products at affordable prices. Companies leveraged logistics, capital mobility, and trade liberalization to reduce costs and build economies of scale. However, recent crises like COVID-19, geopolitical conflicts, and trade weaponization have revealed vulnerabilities and dependencies in key sectors.
How supply chains are being redrawn
Policymakers now focus on safeguarding critical supply chains, reducing high-risk dependencies, and boosting resilience against external shocks. This shift aims to ensure long-term economic stability and competitiveness in an uncertain global environment.
Investors must develop a deep understanding of industry-specific supply chains to be able to pick the winners and avoid the losers in the next decade. It is not just about the country of origin. In a world where everything can be weaponized, the traditional measures of valuation and risk no longer apply.
The physical architecture of supply chains must change, not just to lock in future supplies of raw materials, but also to safeguard the physical and digital integrity of every step of the supply chain, in the name of national security. Foreign direct investment (FDI) will likely suffer, weakening global capital expenditure.
Investment implications
All these considerations are driving debates in boardrooms and investment companies around the world, with the recognition that prevailing country risk premiums will have to change, along with the mechanisms to determine them, because they do not adequately reflect the outlook.
Explore the chapters
Franklin Templeton Institute has published a white paper consisting of five chapters, each based on fundamental research, and focused on identifying sources of risk and opportunity in global supply chains:
- Artificial Intelligence: AI’s future depends on a supply chain vulnerable to disruption—a risk investors can’t afford to ignore.
- Critical Minerals: China’s grip on critical minerals exposes deep vulnerabilities in global supply chains—and investors can no longer assume business as usual.
- Industry: Industrial supply chains are shifting from global to regional—reshaping margins, investment priorities and the outlook for key sectors.
- Shipping: Shipping is the backbone of global trade—and its weaponization is reshaping supply chains, costs and strategic alliances.
- Finance: New financial infrastructure is emerging—and investors must assess how it could challenge the dollar’s dominance and impact global bond markets.
WHAT ARE THE RISKS?
All investments involve risks, including possible loss of principal.
Equity securities are subject to price fluctuation and possible loss of principal.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.
The government’s participation in the economy is still high and, therefore, investments in China will be subject to larger regulatory risk levels compared to many other countries. There are special risks associated with investments in China, Hong Kong and Taiwan, including less liquidity, expropriation, confiscatory taxation, international trade tensions, nationalization, and exchange control regulations and rapid inflation, all of which can negatively impact the fund. Investments in Hong Kong and Taiwan could be adversely affected by its political and economic relationship with China.
An investment in private securities (such as private equity or private credit) or vehicles which invest in them, should be viewed as illiquid and may require a long-term commitment with no certainty of return. The value of and return on such investments will vary due to, among other things, changes in market rates of interest, general economic conditions, economic conditions in particular industries, the condition of financial markets and the financial condition of the issuers of the investments. There also can be no assurance that companies will list their securities on a securities exchange, as such, the lack of an established, liquid secondary market for some investments may have an adverse effect on the market value of those investments and on an investor’s ability to dispose of them at a favorable time or price.
Investment strategies that incorporate the identification of thematic investment opportunities, and their performance, may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner. Focusing investments in the information technology- and/or technology-related industries carries much greater risks of adverse developments and price movements in such industries than a strategy that invests in a wider variety of industries.
Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.
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