Monks’ musings: the end of globalisation’s Long Decade

As with any investment, your capital is at risk.

American political economist Francis Fukuyama’s The End of History and the Last Man envisioned that liberal democracy and globalisation would ensure peace and stability. From 2009 to 2021 – a period we might call the ‘Long Decade’ – this vision largely held.

Neoliberalism dominated western policy, global trade expanded, and the US led a rules-based world order, with international relations governed by agreed treaties and institutions. The post-financial crisis era also brought access to very cheap and readily available capital and soaring valuations for US companies, based on a belief in American exceptionalism.

That era is now behind us.

Capital has a cost, interest rates are no longer zero. Tariffs are back. Nationalism and populism are on the rise. President Trump’s sweeping import tariffs, announced on the so-called ‘Liberation Day’ in April, and the geopolitical tensions at the start of his second term, underscore this shift. Economic uncertainty has surged, and the range of plausible macroeconomic scenarios has widened. The old order is not coming back.

A longer-term perspective

As long-term stock pickers, we have been preparing for this new macroeconomic reality by adapting Monks’ portfolio to these challenges in three ways.

First, we have reduced exposure to companies whose success relies heavily on specific economic conditions.

Second, we have added self-reliant companies driven by exceptional execution, differentiated business models, and internal transformation.

Finally, we continue to favour areas with enduring structural growth, largely independent of political or monetary shifts. Macro ambiguity does not stop us from steering the portfolio into a stronger place and we are positioning it to thrive across a wide range of outcomes.

Reward-seeking resilience 

Over the past 18 months, we have reduced exposure to holdings reliant on external conditions. For example, we sold adidas last year, where the growth case rested on selling into China – a cross-border strategy now fraught with risk. During the quarter, we also sold Yeti, the premium drinkware and cooler company. While branding is strong, its globalised supply chain and increasingly price-sensitive customer base make it vulnerable.

Notably, while leaning into this resilience, we remain growth-focused and reward-seeking.

For every Yeti or adidas, there’s another company that can sail serenely onwards regardless. Often, these are national champions or idiosyncratic opportunities combining resilience with new growth.

Take COSMOS, for example, a new holding over the quarter. Admittedly, this Japanese convenience pharmacy chain is seeking to expand from its base in Kyushu, but only to other Japanese islands. Its aggressive cost discipline and execution set it apart from other Japanese store chains, and our investment case rests on the quality of the execution of this rollout story, rather than external variables.

Certainty in an uncertain world

We remain convinced that many technological trends, especially artificial intelligence (AI), will continue apace, independent of political or economic shifts. We believe AI could be the most significant engine for portfolio growth over the next decade, surpassing even the consumer internet boom that defined the Long Decade. 

AI’s broad applicability makes it an accelerator for growth across almost every industry. Software development is already being transformed, and this quarter’s new holding, software engineering services provider EPAM Systems, looks set to benefit. While the market clearly sees AI as a threat to its business, we see significant potential for an inflection in employee productivity, increasing customer demand to help implement bespoke software and a substantial margin expansion.

AI tools are also reshaping digital advertising and accelerating autonomous driving technology. These trends underpin our recent additions to AppLovin (in-app advertising) and Uber (ride-hailing) in the quarter. We have also continued to build Monks’ position in NVIDIA, whose chips represent the infrastructure of the AI revolution.

Pulling it all together

Monks’ approach seeks to harness the advantages of a diversified approach to growth investing, expressed through our growth profiles: Stalwart, Rapid and Cyclical. Because market returns have been dominated by a handful of mega-cap companies over recent years, this concentration has masked an enormous dispersion in valuations, which we have taken advantage of to upgrade the portfolio.

The portfolio’s valuation premium continues to decline relative to the broader market, without compromising our growth ambition (with earnings growth forecasts from the portfolio expected to remain significantly ahead of the market). Key quality indicators, such as return on equity or overall indebtedness levels, remain supportive and consistent with a portfolio of highly adaptable companies. 

In short, we have upgraded the portfolio, which we believe is well-positioned to thrive across various macroeconomic scenarios.

Performance source: Morningstar, FTSE, total return in sterling

Past performance is not a guide to future returns.

Important information    

This communication was produced and approved in July 2025 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.  

The Trust invests in overseas securities. Changes in the rates of exchange may also cause the value of your investment (and any income it may pay) to go down or up. 

This article does not constitute, and is not subject to the protections afforded to, independent research. Baillie Gifford and its staff may have dealt in the investments concerned. The views expressed are not statements of fact and should not be considered as advice or a recommendation to buy, sell or hold a particular investment.

Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). The investment trusts managed by Baillie Gifford & Co Limited are listed on the London Stock Exchange and are not authorised or regulated by the FCA. 

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