U.S. Equities Three investment opportunities in a fragmented world

The world is undergoing significant structural change defined by rising geopolitical conflicts, trade barriers and a more fragmented global landscape. As this multi-year realignment plays out, identifying which companies can best adapt to the new framework is paramount to successful investing.

“With trade more restricted, the global economy will be less efficient, forcing companies to innovate to combat higher costs,” says Kohei Higashi, equity portfolio manager.

So far, markets worldwide are constructive about the opportunities ahead. Here are three areas in which we see investment opportunities.

Trade deals have propelled markets to new records

Sources: Capital Group, MSCI, RIMES. As of 31 October 2025. Countries are represented by their respective MSCI index.

1. New industrial policy rewires supply chains

Geopolitical tension obviously impacts defence spending, but it is also pressuring supply chains that underpin the global economy.

In response, the United States government has taken strategic equity positions in semiconductor company Intel, rare earth producers MP Materials, Lithium Americas, Trilogy Metals and US Steel. Additionally, the administration rolled back pollution rules tied to copper and signed separate deals for a 15% cut of NVIDIA and AMD’s chip sales to China.

These agreements represent a new industrial policy centred on national security, says international policy adviser Tom Cooney. “Big goals such as creating a domestic alternative to China’s rare earth market can only be done within a short timeframe via public-private partnerships. Think Project Apollo to beat the Soviets to the moon or Operation Warp Speed to develop COVID vaccines in record time.” China’s rare earth export restrictions highlight what is at stake given their use in smartphones, electricity grids, defence systems and health care.

Globally, commodities remain attractive in this new environment, particularly at current valuations, says Lisa Thompson, equity portfolio manager.

“There’s less slack in the system. Often, commodity prices surge with even a modest uptick in demand because new supply can take years to come online,” she explains. The expected increase in demand could benefit certain mining companies such as Canada’s Barrick Mining, Glencore in Switzerland and US-based Freeport McMoran.

China poised to dominate critical minerals supply for years

Sources: Capital Group, IEA 2025 ("Global Critical Minerals Outlook 2025"), USGS. Figures represent global share of refined material production across countries, with estimates for 2035 ("2035E") from the IEA as of May 2025. Minerals shown above are a subset of the list of 50 critical minerals published in 2022 by the USGS.

“In a bid to tighten supply chains, the Trump administration is also strong-arming companies to reshore manufacturing,” says Cheryl Frank, equity portfolio manager. She believes Apple and chipmaker Taiwan Semiconductor Manufacturing’s promised investments in the US have the potential to spur growth in US industrial sectors over the long-term.

2. US playing catch-up on automation

Tariffs, reshoring and crackdowns on immigration are likely to accelerate automation, Higashi says. That is because companies may not have access to low-cost labour and materials — typical areas that allow profit margins to grow.

Reshoring is difficult in part because the US labour market is wired for globalisation, a decades-long process that saw workers entering higher-paying services and white-collar work rather than manufacturing.

Since he began visiting Chinese factories in 2000, Higashi has seen firsthand their transition to efficient, low-cost manufacturers. The US is turning to automation to fill labour and skill gaps in manufacturing. Moreover, advances in AI could accelerate the process and extend automation to services industries.

US-based Applied Industrial Technology, which sells robotic arms and sensors, is well positioned to capitalise on higher demand for automation technologies. German conglomerate Siemens has a sizeable market share in China for its automation products and could also experience higher revenue growth from US demand.

US adoption of robots increasing, but trails many economies

Sources: Capital Group, International Federation of Robots. Latest available data through 2023 as of 30 October 2025. Data reflects number of robots installed per 10,000 employees.

3. Multinationals could have an advantage

Some investors might think domestic companies such as steel producers, for example, have the most to gain from shifting trade policies. But according to Higashi, multinationals have certain advantages.

“Very agile and decisive multinationals are better equipped to adapt their resources and respond to constantly changing policy directions,” he explains, citing their familiarity with cross-border regulations.

Northrop Grumman stands out among defence companies for the technology behind its stealth jets and long-range weapons — and global footprint that spans the US and its allies. Higashi sees growth potential in the company’s international markets as Japan, Germany and other European countries ramp up defence spending.

There are many attractive non-US companies that are competitive on a global scale, according to Chris Thomsen, equity portfolio manager. “Holland-based ASML essentially has a monopoly on machines that make the leading-edge AI chips, while China’s Tencent is considered one of the most innovative fintech, gaming and social media companies in the world.”

This does not mean trade dynamics will not help companies with a strong domestic presence. In fact, companies with established local manufacturing in large economies like China and the US could see increased demand if tariffs make foreign alternatives more expensive.

Amid the debate about where to invest during times of upheaval and structural change, what is clear is that leadership matters. Management teams that are nimble, have a sense of urgency and are willing to divest large but low-profit businesses to focus on their strategic core businesses tend to be more successful, according to Higashi. One example is Japanese conglomerate Hitachi, which sold several business segments starting in 2009 to concentrate on infrastructure and information technology solutions.

“Investors need to assess each company's unique situation and their management's ability to make decisive changes,“ Higashi adds. “Ultimately, this environment calls for careful stock selection to find the winners.”