Globalization has shaped the world for the last 30 years, but it is coming to an end. That is the view of two of the world's best-known investors, Oaktree chair Howard Marks and BlackRock chief Larry Fink.
The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades, according to the latest letter to shareholders written by Fink.
Marks shared a similar sentiment in one of his memos. The war made companies and governments realize how reliant they would become.
The pendulum has swung back toward local source after recognizing the negative aspects of globalization.
What is globalization? The growing interdependence of the world's economies, people and cultures is defined by the economists at the Peterson Institute. Crossborder trade in goods and services, as well as flows of investment, people and information, bring about this.
The end of the process would have dramatic consequences for investors, who have become used to a highly integrated world.
There are three areas where the end of globalization could have a profound impact.
The global energy markets.
The global economy and markets have been affected by the invasion of Ukraine by Russia. In surging commodities prices is that more clear? A year ago, the price of the oil was around $65 a barrel.
The transition to green energy will be helped by higher fossil-fuel prices. The prospects for renewable energy companies could be bright in the future.
More than ever, countries that don't have their own energy sources will need to fund and develop them, which means investing in wind and solar power.
The boss was not as optimistic about the short term. The US has increased fossil-fuel production because of a need to cut back on Russian oil.
Many investors have shifted their focus to energy companies and commodities, which are expected to keep rising over the next year as the war plays out.
Inflation.
The question of inflation is linked to energy. It is above 5% in Europe and the UK, and has reached a 40-year high in the US.
The end of globalization is likely to make things worse.
Marks highlighted how offshoring has led to a sharp fall in the cost of goods.
The end of that process could give a boost to working-class communities in the US and Europe. Western workers are more expensive so it could drive up prices.
A large-scale reorientation of supply chains will be inflationary.
There are other opportunities.
Digital currencies may have a role to play in a deglobalizing world, according to the head of the world's largest asset manager. The war will force countries to rethink their currency dependency.
A global digital-payment system, thoughtfully designed, can enhance the settlement of international transactions while reducing the risk of money laundering and corruption.
Marks ended his memo with a hopeful note.
After many decades of globalization and cost minimization, I think we are about to find investment opportunities in the swing toward reliable supply.
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