Toby Watson: What the Shift Away from Globalisation Means for Investment Portfolios
The long era of deepening global integration is giving way to something more fragmented and unpredictable – and for investors, understanding what that shift means in practical portfolio terms is becoming increasingly important, as Toby Watson’s perspective illustrates.
For decades, globalisation provided a relatively stable backdrop for investment decision-making – open markets, predictable supply chains and the steady expansion of cross-border capital flows. That backdrop is shifting, and the implications for portfolio construction are significant. Toby Watson, whose career in international finance took him across markets in Europe, North America and Asia, brings a perspective shaped by direct experience of how global capital flows operate in practice – and what happens when the assumptions underpinning them begin to change.
Deglobalisation as an Investment Challenge, Not Just a Policy Debate
It is tempting to treat deglobalisation as primarily a political or economic story rather than an investment one. In reality, the two are closely connected. The structure of the global economy shapes the correlations between asset classes, the currency dynamics that affect international holdings and the risk premiums embedded in everything from emerging market debt to multinational equity valuations.
For much of the past thirty years, portfolios built on the assumption of continued global integration benefited from falling trade barriers, expanding supply chains and the steady integration of emerging markets. Those tailwinds cannot be taken for granted today. The question for investors is not whether deglobalisation is happening, but what it means for the specific assets they hold – and Toby Watson’s perspective on that question is informed by decades of direct market experience.
How Should Investors Think About Deglobalisation Risk in Practical Terms?
The challenge is that deglobalisation risk does not show up neatly in standard risk models. Toby Watson’s experience across international markets at Goldman Sachs gave him a direct understanding of how quickly cross-border capital flows can shift when political or regulatory conditions change – and how portfolios that appear well diversified on paper can behave in a much more correlated way when global conditions deteriorate simultaneously. Investors who have not revisited their geographic diversification assumptions may be carrying more concentration risk than they realise.
What Toby Watson Observes About Geographic Diversification
Geographic diversification has long been a standard tool of portfolio construction, but its logic depends on assumptions about the relative independence of different economies and markets. As supply chains shorten and trade blocs become more defined, the diversification benefit of simply spreading assets across geographies becomes less reliable.
Toby Watson’s background in structured finance developed a particular sensitivity to the difference between apparent diversification and genuine diversification – the difference between assets that look uncorrelated in normal conditions and those that remain genuinely uncorrelated when conditions become stressed. That distinction is becoming more important as the global economic landscape fragments.
The Implications for Emerging Market Exposure
Emerging markets were among the primary beneficiaries of the globalisation era. The partial reversal of those trends creates a more differentiated picture, in which some emerging markets are better positioned than others, depending on their relationship to the new geopolitical and trade alignments taking shape.
For investors with emerging market exposure, the key question is whether that exposure reflects a genuine view on specific markets, or whether it was built on assumptions about continued global integration that may no longer hold. Toby Watson’s view, shaped by years of working across these markets professionally, is that differentiation matters considerably more now than it did when the globalisation tide was lifting most boats.
Rethinking the Role of Currency in a Fragmented World
Currency dynamics are among the most direct channels through which deglobalisation affects investment portfolios. Among the considerations becoming more prominent for internationally diversified investors are:
- The increased volatility of certain currency pairs as trade patterns shift and central banks respond to more fragmented economic conditions
- The potential for currency correlations that held during the globalisation era to break down as economies pursue more independent monetary policies
- The growing importance of currency as both a source of risk and opportunity in portfolios spanning multiple geopolitical blocs
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How Toby Watson Approaches Portfolio Construction in This Environment
The shift away from globalisation does not make international investing less important – it makes it require more careful thinking. The passive, index-driven approach to global equity exposure that worked well in an era of steady integration may need to give way to more active, differentiated positioning.
Toby Watson’s career, from his years at Goldman Sachs through to his current work in independent investment management, has consistently reinforced the value of understanding the macro environment deeply before making portfolio construction decisions. That discipline becomes more rather than less important when the macro backdrop is shifting structurally – and it is a discipline that Toby Watson has applied consistently across very different market environments.
For investors trying to navigate the practical implications of deglobalisation, several considerations are worth keeping in mind:
- Supply chain restructuring is creating new investment opportunities in domestic and near-shore industrial capacity, alongside risks for companies that built their models around global integration
- The reassertion of industrial policy in major economies is changing the competitive landscape in ways that affect sector and stock selection
- Infrastructure investment – both physical and digital – is becoming more prominent as economies seek to reduce dependencies and build resilience into critical systems
Toby Watson’s approach to these questions draws on a career spent thinking carefully about how macro trends translate into portfolio implications. The shift away from globalisation is, in that sense, a prompt for careful reassessment of the assumptions portfolios are built on – and for the disciplined, forward-looking thinking that Toby Watson has applied throughout his career in international finance.
