How to invest in the global economic reset

PM Capital’s Kevin Bertoli believes we’re living through one of the biggest economic transitions in decades. He calls it a “structural reset of the global economy” - one that’s been decades in the making and will take decades to unravel.

Investors are entering a world where the easy benefits of global integration are behind us and where resilience, resource security and regional strength will matter more than ever.

It’s a bold claim, but as Bertoli explains, investors who understand where we’ve come from - and where we’re heading - could find unique opportunities amid the noise.

For the full interview and insights, watch the interview above or read a summary below. 

INTERVIEW SUMMARY

The era of deglobalisation

The key to understanding today’s market, Bertoli says, is to look back at the forces that defined the past 30 years.

“At the heart of that was China as a global manufacturing base,” he says. “It started with China’s entry into the WTO [World Trade Organisation] in 2001… they’ve really developed more than just a manufacturing powerhouse. They’ve leveraged that into economic power globally.”

That three-decade rise of globalisation, marked by open trade, global supply chains and low-cost production, is now starting to unwind.

“We don’t think this is a Trump phenomenon,” Bertoli adds. 

“This shift from the power base of globalists to nationalists is something that will play out over a 10, 15, 20-year period. And that’s going to create a lot of opportunity for us as investors to take advantage of.”

From fear to frenzy

Only months ago, markets were grappling with uncertainty around tariffs, inflation, and geopolitics. Fast forward to today and investors have all but pushed that to the side. Markets are at record highs, volatility is at record lows, and valuations are stretched.

“So you’ve had a huge shift,” he notes. “But interestingly, what we’ve been able to identify is a lot of bifurcation in markets.”

That divergence between overhyped sectors and deeply discounted ones is where PM Capital sees opportunity. Among the areas he highlights are global beverages and pharmaceuticals.

“We’ve been able to exit out of positions that have performed very well and rotate into sectors where they’re actually very depressed… we’re talking valuations at 10 to 15-year lows and share prices that are off 50, 60% from their highs.”

Europe: from herbivore to carnivore

Europe features heavily in PM Capital’s portfolio. For good reason, Bertoli says, despite the pushback they often receive. It’s a region that is consistently overlooked in favour of the US.

But the tide may be turning.

“The re-emergence of Trump in 2024 was a big catalyst for Europe,” he notes. “European leaders have been forced into having to act.”

He points to French President Emmanuel Macron’s speech at a European leaders’ summit late last year, where he described the global landscape in terms of carnivores and herbivores - and that if Europe continues to outsource security and technology to the US or China, “you’re going to turn around in 20 years and realise the carnivores have come in and eaten the herbivores.”

Europe’s recognition of this imbalance is sparking structural change. “We like the framework and the setup there,” Bertoli says. “It’s a structural shift in the opportunity set in Europe.”

Where PM Capital is positioned

Two of PM Capital’s biggest current themes are European banks and industrials.

“European banks are going to be a big beneficiary of greater activity in Europe,” Bertoli says. “Rates have normalised, loan growth is coming through, but valuation is still well below other developed market banks.”

Industrials are another focus, particularly those positioned to benefit from reshoring and automation, pointing to businesses like Siemens and SP. “Those are playing off some of these big mega trends that we see playing out over the next decade,” he explains.

Then there’s commodities.

“There’s a clear recognition of which countries have access to the right critical minerals and who doesn’t,” Bertoli says. “We’ve got big positions in copper playing off the back of that.”

2 companies reshaping the global map

When asked which holdings best capture PM Capital’s thesis, Bertoli points to Siemens (ETR: SIE) and Union Pacific (NYSE: UNP).

“Siemens is at the epicentre of this global reshoring story,” he says. “If we want to bring manufacturing back to places like the US or Europe, you need companies like Siemens to automate the process. That automation play within the Siemens business is going to be a long-term driver of earnings growth.”

PM Capital has held Siemens since 2018–19. “The stock’s comfortably doubled, but we think it can continue to compound at high single-digit, low double-digit rates,” Bertoli says.

The second is a newer position: Union Pacific, the largest rail operator in the US. It is a business that should benefit from the global reshoring that is taking place, but on top of that, is seeking to merge with the other major rail player in the US, Norfolk Southern — a move that could reshape logistics efficiency across the country.

“What is more MAGA than having an intercontinental railway in the US?” Bertoli quips.

Staying disciplined

Despite the optimism, Bertoli remains wary of excess, particularly in areas like AI, where valuations and capital allocation have surged without much scrutiny on returns.

He references a remark from Mark Zuckerberg: The risk of overspending by a couple hundred billion dollars was less risky for him than underspending.

“A couple hundred billion dollars is greater than the market cap of most companies in the S&P 500,” Bertoli notes. “We’re talking astronomical figures. When that happens, you tend to get pockets of misallocation of capital.”

What will drive markets from here

Bertoli believes that ultimately, it will be earnings growth that will continue to drive markets, as they always have.

In a world undergoing a structural reset, Bertoli says the winners will be those able to find value in overlooked corners of the market, where sentiment is low but fundamentals are improving.

“Looking for pockets where valuation makes sense, where the businesses can grow or they can inflect and grow again, I think is really important,” he says. “There’s plenty of value there for investors to take advantage of over the next couple of years.”