For decades, globalization has been an established part of the global economic system, but fund manager Dan Katz believes its unravelling could reshape the global economy. He tells CNBC how he’s navigating the new economic order. “The story of the last 30 years has really been a story of increasing globalization and efficiency throughout the economy. What we’ve seen as a result of the shocks of the last few years, is that the efficient system was actually very vulnerable and very fragile,” Katz told CNBC’s “Squawk Box Europe” on Thursday. Now, he said, deglobalization, increasing resilience in business models and growing security of supply chains is set to be the big secular drivers of change in the global economy. “That affects all industries. It’s not just resources, it’s not just technology. It’s across the board,” he added. The global economy has been plagued by severe supply chain disruptions since the onset of the Covid-19 pandemic. Pre-pandemic, the world’s supply chain was optimized to efficiently meet the demands of just-in-time manufacturing. But port delays, transport shortages and soaring freight rates during the pandemic brought the system to a near-standstill. Against this backdrop, there have been growing calls from both policymakers and corporates to reverse globalization and accelerate the transition to localization, or more regional supply chains. It is a trend that Katz, the co-founder and portfolio manager at Amberwave Partners, is taking advantage of. “We’re really looking for companies that have relatively more secure supply chains and more resilient business models that are going to be able to navigate some of these geopolitical forces better,” he said. He believes business models with lesser exposure to global supply chains will outperform, especially if a recession hits. One stock that looks particularly well positioned, according to Katz, is Florida-based The Mosaic Company , which produces concentrated phosphate and potash. Weakening U.S economy On the macro front, Katz believes the U.S. economy is “unquestionably” seeing a weakening right now. “It’s possible we may be in a technical recession, but really we think the trough of the economic activity is likely to be probably nine months out once the tightening of monetary policy actually hits the real economy,” he said. Katz noted that the market is still pricing in some earnings growth this year, but he expects the economy will begin to see some adjustments in earnings growth once the effects of monetary policy hits home. However, Katz said he is relatively unconcerned about the possibility of a recession, given his fund’s longer-term outlook and attempts to take advantage of secular trends. ‘We are really long-term focused investors who are trying to take advantage of sustained outperformance over time because that’s really where you’re going to build wealth in your portfolio by continued alpha generation over time,” he said.
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