The Covid-19 pandemic and resulting supply chain issues as well as geopolitical tensions around the globe have accelerated the deglobalization trend, which Neuberger Berman says investors can capitalize on by investing in defence, healthcare and trade sectors.

“Twentieth-century-style war between major states has returned, but against a context of 21st-century technology,” writes Michael Barr, Senior Research Analyst at Neuberger Berman.

First up is the rising focus on border security, in the context of the Russian invasion of Ukraine. The investment management firm talks about the increased defence spending due to the war, but newer weapons systems are already in development. Neuberger Berman cites the developments in the US and China, and the additional budget assigned to research & development while talking about the different opportunities that may present themselves to investors.

Taking into consideration the healthcare aspect of deglobalization, the investment management firm talks about the increased importance of public health. The Covid-19 pandemic shook up the healthcare industry and revealed gaps as cross-border cooperation came to a standstill. This has increased the focus on investing in healthcare technology such as mRNA.

Additionally, the US and Europe are trying to wane their dependence on China for active pharmaceutical ingredients and other raw materials required for manufacturing drugs.

Lastly, trade is still in the backseat and is yet to fully recover. The trade war between US-China as well as China’s threat of attacking Taiwan has escalated the need to have supply chain resiliency.

Neuberger Berman gives the example of Japan, which is highly dependent on food imports, and was reliant on Russia. Trading house Marubeni quickly cut ties with Russian suppliers and signed agreements with Proximar, which is building a salmon farm in Japan.

“Near-shoring, friend-shoring and moving from “just-in-time” to “just-in-case” food supply-chain management are driving what we see as a general redirection of spending,” says Barr.

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