We are now facing the threat of a new Cold War between the US and China.

Over the next few years, we may see incentives and legislation from the US and other Western governments to cut Chinese products out of critical supply chains. There will be a focus on protecting intellectual property and innovation.

A new Cold War could see a refocus on technology and manufacturing within America and its allies.

Although China has developed manufacturing advantage in many areas, its top-down model has struggled to increase innovation or productivity. Returns on capital investment, which mainly go into infrastructure, are showing signs of diminishing returns. In this area, the US has an advantage, whereby a free economy should produce more innovation.

As investors, we are looking for the businesses that will benefit and grow in this new world.

More research is to follow on this. For now, there is a field of opportunity within our existing portfolio for those willing to embrace the risk-return equation…


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