The Rise of Nationalism

Perspectives

July 2025

2024’s brief moment of “American Exceptionalism”, the repudiation on “Liberation Day” of decades of global trade cooperation, the steady advance of populist political parties in Europe, and stalled cross-border merger and acquisition activity are only the latest examples of a steady retreat from globalization. This has implications for global investors, who have ridden a wave of wealth creation propelled by the interconnectedness of economies, the easy movement of capital, goods, people, ideas and technology across borders, governmental cooperation and the worldwide spread of cultural wonders. We believe that while the age of globalization has not ended, the trend has probably peaked, and investors must consider how the redirection of this powerful force toward nationalist policies affects portfolio decisions.

The United Kingdom’s shocking vote to exit the European Union in 2016 may have kicked off the trend toward deglobalization. Immigration, once seen as a powerful force for economic growth and upward mobility, has become a source of social tension, and a propellant for nationalist political movements in many countries, including Germany and the U.S. Russia’s assault on Ukraine has nationalist roots. Tourists, despite eagerness to spend, provoke growing resentment in Spanish cities. China, which rose to economic prominence thanks in large part to cooperative global trade agreements, pursues confrontational nationalist policies in its dealings with everything from intellectual property to ethnic minorities and disputed territory. And the U.S. has twice elected a President who puts “America First” at the center of his policy agenda.

Signs of growing nationalism have emerged in TSW’s broad portfolio of international stocks. Japanese convenience store giant Seven & I has resisted a strategically compelling acquisition proposal from Canada’s Alimentation Couche Tard, largely on the dubious grounds that the company’s 7-Eleven stores are a “core industry,” whose acquisition could pose a significant risk to national security. Hong-Kong conglomerate CK Hutchison announced the sale of some of its global ports business, including ports at either end of the Panama Canal, for a staggering price, only to encounter strong opposition from the Chinese government, which is seeking to block the deal because it is not in China’s national interest. And recently, the Australian oil and gas producer Santos received an attractive buyout from a consortium led by Abu Dhabi’s national oil company. The stock trades well below the offered price because market participants fear the Australian government will block the deal on national security grounds. As owners of these assets, TSW clients would likely benefit significantly from the completion of each value-unlocking transaction, but we cannot ignore the probability that national priorities will trample free-market capitalism and that sensible deals will not be completed.¹

When President Trump announced on April 2nd that the U.S. would impose sharply higher tariffs on many imported goods and practically every trading partner, signs emerged that the accelerating retreat from globalization would propel a rethinking of investment priorities and capital allocation. The U.S. Dollar, the world’s reserve currency since the abolishment of the gold standard in 1971 and the accepted “safe haven” in periods of global turmoil, has weakened by nearly 10% since 2025 began and U.S. Treasury rates have remained stubbornly high, even as geopolitical events triggered risk avoidance—normally an impetus for Treasury buying. Foreign stocks, which have lagged far behind their U.S. counterparts for most of the last 15 years, have begun to outperform. All of this may be the early stages of a shift in global investment flows away from the U.S. Since U.S. stocks have made up a rising share of global asset allocation since the Financial Crisis of 2008-2009, any shift away from U.S. stocks would produce a strong tailwind for non-U.S. equities. This is underpinned by the fact that foreign stocks are generally cheaper than U.S. companies.

TSW believes that the era of globalization that began after World War II was primarily a force for good, promoting global harmony (mostly) and driving rising living standards and economic opportunity. We are strong believers that the ability to invest capital easily in the best companies around the world is an undeniable benefit to all investors. But globalization also had negative effects including spiraling economic inequality, workforce displacement, environmental degradation, and the blurring of unique cultural identities. Rising nationalism could hold back economic progress, alter the patterns of global commerce and increase the potential for geopolitical conflict. Investors must be alert to changing risks and opportunities.

Investment themes predicated on deglobalization, like re-shoring, national defense spending and infrastructure investment, will play out over a long-time horizon. Chasing mega-trends like this is error-prone work in the short run. TSW’s long-held view is that the best strategy, whether nationalism continues to rise or gives way once again to global cooperation, is to maintain broad exposure to strong companies around the world—including the U.S., Europe, Latin America, Japan and the emerging powerhouses in Asia and the Middle East. While we observe trends like the rise of nationalism and consider their effects, our big-picture observations take a back seat to the enduring importance of valuation and fundamental business performance in investment decision making. Our portfolios are designed to perform well under the wide range of circumstances we may encounter in an era of rising uncertainty and change.

^1. Holdings as of 6/30/2025. Please see Important Disclosure Information for Holdings Disclosure at the end of this document.

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IMPORTANT DISCLOSURE: This commentary is intended for informational purposes only and does not constitute a complete description of our investment services, analysis, or performance. This commentary is in no way a solicitation or an offer to sell securities or investment advisory services. The expressed views and opinions contained herein are for informational purposes only, are based on current market conditions, and are subject to change without notice. Although information, opinions, and statistics contained herein have been obtained from sources believed to be reliable and are accurate to the best of our knowledge, Thompson, Siegel & Walmsley LLC (“TSW”) cannot and does not guarantee the accuracy, validity, timeliness, or completeness of such information and statistics made available to you for any particular purpose. This commentary should not be considered as investment advice or a recommendation of any particular security, strategy, or investment product. Past performance is not indicative of future results. No part of this commentary may be reproduced in any form, distributed, or referred to in any other publication, without express written permission of TSW.

GENERAL ECONOMIC & MARKET COMMENTARY DISCLOSURE: Comments and general market related projections are based on information available at the time of writing and believed to be accurate; are for informational purposes only, are not intended as individual or specific advice, may not represent the opinions of the entire firm and may not be relied upon for future investing. Certain information contained in this material represents or is based upon forward-looking statements, which can be identified by the use of terminology such as “may”, “will”, “should”, “expect”, “anticipate”, “target”, “project”, “estimate”, “intend”, “continue” or “believe” or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of an Account may differ materially from those reflected or contemplated in such forward-looking statements. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decisions. Past performance is not indicative of future results.

HOLDINGS DISCLOSURE: The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of the portfolio’s holdings. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable, or that the investment recommendations or decisions made in the future will be profitable or will equal the investment performance of the securities discussed herein. Please note that this strategy invests in securities outside of the Index. A complete list of every holding and every holding’s contribution to performance during the period and the methodology of the contribution to return is available by contacting us at TSWinfo@tswinvest.com.

INDUSTRY WEIGHTINGS & PORTFOLIO CHARACTERISTICS DISCLOSURE: The industry weightings and portfolio characteristics are presented as of the date shown on this presentation and may change without notice. A complete list of industry weightings and individual security positions are available on request by contacting us at TSWinfo@tswinvest.com.

EQUITY SECURITIES RISK: Equity securities generally have greater risk of loss than debt securities. Stock markets are volatile, and the value of equity securities may go up or down, sometimes rapidly and unpredictably. The value of equity securities fluctuates based on real or perceived changes in a company’s financial condition, factors affecting a particular industry or industries, and overall market, economic and political conditions. If the market prices of the equity securities owned by the strategy fall, the value of your investment in the strategy will decline. Your portfolio may lose its entire investment in the equity securities of an issuer. A change in financial condition or other event affecting a single issuer may adversely impact securities markets as a whole.

INTERNATIONAL INVESTING RISK: Investments in global/international markets involve special risks not associated with U.S. markets, including greater economic, political and currency fluctuation risks, which are likely to be even higher in emerging markets. In addition, foreign countries are likely to have different accounting standards than those of the U.S.

PRINCIPAL RISK: Risk is inherent in all investing. Many factors and risks affect performance. The value of your investment, as well as the amount of return you receive on your investment, may fluctuate significantly day to day and over time. You may lose part or all of your investment in your portfolio or your investment may not perform as well as other similar investments. An investment in the strategy is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. You may lose money if you invest in this strategy.

VALUE INVESTING RISK: The prices of securities TSW believes are undervalued may not appreciate as anticipated or may go down. The value approach to investing involves the risk that stocks may remain undervalued, undervaluation may become more severe, or perceived undervaluation may actually represent intrinsic value. Value stocks as a group may be out of favor and underperform the overall equity market for a long period of time, for example, while the market favors “growth” stocks.

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‍General Economic & Market Commentary Disclosure: Any comments and general market related projections are based on information available at the time of writing and believed to be accurate; are for informational purposes only, are not intended as individual or specific advice, may not represent the opinions of the entire firm and may not be relied upon for future investing. Certain information contained in this material represents or is based upon forward-looking statements, which can be identified by the use of terminology such as "may", "will", "should", "expect", "anticipate", "target", "project", "estimate", "intend", "continue" or "believe" or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or the actual performance of an Account may differ materially from those reflected or contemplated in such forward-looking statements. Investors are advised to consult with their investment professional about their specific financial needs and goals before making any investment decisions. Past performance is not indicative of future results.