The changing shape of global trade
- 03 mins 53 secs
The very definition of global trade has changed in the years since portfolio manager Jody Jonsson began investing internationally. Here, she explores that evolution and reveals the types of companies that excite her today.
Will McKenna: Jody, help us understand: How should we be thinking about trade in today's world? And what are the implications for investors as we look ahead into 2019?
Jody Jonsson: Well, the whole notion of global trade has changed so much over time. When we first launched our fund New Perspective in 1973, which is oriented around investing in companies that benefit from change in global trade patterns, trade back then was defined as export of goods from one country to another. But now, of course, the economy is so much more digital. So, now it's about flow of data and information. It's much more about a knowledge economy in a digital infrastructure rather than a physical infrastructure. So, the whole way that we define trade has changed. And I think, because of that, it's harder for governments and legislatures to mandate trade, or mandate changes to trade. And I think it's very important, in the current environment, to not get caught up in the noise around trade and protectionism. There's sort of a new data point every day, and it's very easy to get focused on whether it's steel or soybeans or aluminum — or which commodity are we talking about today that might have some sort of protectionist action applied to it?
I think what gives me confidence is that, over 45 years of investing in New Perspective Fund®, we've been through a lot of different cycles. We've been through the oil embargo of 1973. We've seen a lot of different trade environments, both favorable and unfavorable. And time and time again, smart companies figure it out. When we invest with really strong global companies — with seasoned management teams — they find a way to prosper almost regardless of the environment. And I don't mean to sound complacent about it, but I do think that, at the company level, companies find ways to benefit even when governments are trying to rearrange the chess board on them.
Will McKenna: Right. Thanks for sharing that. I should mention, for legal and compliance reasons, unfortunately our friends outside the U.S. listening to this aren't able to access the American Funds. But nevertheless, the same concepts, I think, would apply. Safe to say, not only has trade evolved, but where are you netting out in terms of the ultimate impacts here? Are you still fairly optimistic that we'll find a commonsense path through this? Are you concerned? Where are you on that spectrum?
Jody Jonsson: I'm fairly optimistic that once all the rhetoric is put aside, we will come up with some sensible decisions. I think, in particular, the issue around intellectual property in China is a very important one that's being highlighted in these current discussions. And I think China realizes that it probably has been too aggressive in appropriating intellectual property. So, I'm fairly optimistic that we might come to a good solution that might make multinational companies a bit more comfortable.
In terms of the investment impact, what I'm looking for specifically is companies that are multinational, but that can think in a multilocal way. I think, rather than deglobalizing, companies are going to have to figure out how to be multilocal, meaning they will have to have operations in more of their local markets. They'll have to produce where they sell. They'll have to be more nimble and more responsive to local competitors. Because aside from all the trade issues, what we're finding is that, often now, multinationals are being leapfrogged by faster, more nimble local competitors who are more in touch with local markets. I think that's as big a challenge for multinational companies now as any of these political issues are.
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