Are you swimming in the right water?
Key Takeaways
- The tide is turning: For more than a decade, mercantilist policies and capital inflows into US assets created a self-reinforcing cycle that rewarded many investors. However, as US policy turns inward—marking a structural shift in the old regime—many investors could be caught off guard.
- Repricing underway: Non-US assets and currencies remain historically cheap, but fiscal expansion in regions such as Asia and Northern Europe could trigger capital repatriation, strengthening local currencies and lifting long-neglected equity markets.
- Active opportunity: While not as extreme as the immediate post-pandemic period, valuation gaps outside the US remain historically wide, presenting an opportunity for bottom-up active managers.
Author: Graeme Forster
Graeme Forster, Master of Arts (Honours) in Mathematics (University of Oxford), Doctor of Philosophy in Mathematical Epidemiology and Economics (University of Cambridge), Chartered Financial Analyst. Graeme joined Orbis in 2007. He directs client capital in the Orbis Global Equity Strategy, and he has overall accountability for the Orbis International Equity and Optimal Strategies.
Key Takeaways
- The tide is turning: For more than a decade, mercantilist policies and capital inflows into US assets created a self-reinforcing cycle that rewarded many investors. However, as US policy turns inward—marking a structural shift in the old regime—many investors could be caught off guard.
- Repricing underway: Non-US assets and currencies remain historically cheap, but fiscal expansion in regions such as Asia and Northern Europe could trigger capital repatriation, strengthening local currencies and lifting long-neglected equity markets.
- Active opportunity: While not as extreme as the immediate post-pandemic period, valuation gaps outside the US remain historically wide, presenting an opportunity for bottom-up active managers.
In his 2005 commencement address, “This Is Water”, David Foster Wallace tells a simple parable. An old fish greets two younger fish by saying, “How’s the water?” They swim away asking themselves, “What is water?” It’s a profound message: the most pervasive and important realities in our lives are often the ones we fail to notice. The same is true in investing. The market environment can become so familiar that it almost becomes invisible.
The water we've been in
For well over a decade, that “water” has been defined by a specific global dynamic: a world of mercantilist policies, cheap currencies, and export-led growth. Many regions—most notably in Asia and parts of Europe—have run policies designed to maintain competitive currencies and subsidise exports. Those exports were largely aimed at the US, with surplus dollar earnings flowing back into US asset markets.
The result was a powerful self-reinforcing cycle. Capital inflows into the US pushed up asset prices and drove down interest rates. Lower rates fuelled a fiscal boom, stimulating imports and further deepening the trade and capital imbalance. The dollar and US assets strengthened in tandem, rewarding investors who rode the trend.
Passive investing thrived in this environment. With US markets and the dollar seemingly locked in a perpetual uptrend, the path of least resistance for global capital was into the US. That was the water we all swam in.
“Given the lack of eyeballs on ex-US markets over the last decade, markets are rife with inefficiency and therefore opportunity for active management.”
How the water is changing
But water doesn’t stay still. The environment has shifted dramatically. Policy in the US has turned inward, emphasising domestic industrial revival and strategic tariffs. This marks a structural break from the old regime. Export-led growth models are harder to sustain when the main destination market becomes more self-sufficient. For the export economies, this change forces adaptation. If they can no longer rely solely on US demand, they will need to stimulate their own. Rather than flowing abroad, vast pools of domestic savings may now be redirected inward toward investment, fiscal spending, and local consumer demand. This has significant implications for investors. Global portfolios are still heavily concentrated in US assets and the dollar—an understandable legacy of the last cycle but potentially a dangerous one if the tides are turning. Outside the US, assets and currencies remain cheap—a “double discount.” Now, they may also have a catalyst: a reversal in the capital cycle as money begins to flow back home. Fiscal expansion in regions such as Asia and Northern Europe could strengthen local currencies and lift long-neglected equity markets.
Stocks outside the US receive far less analyst coverage
Median number of analysts covering US vs ex-US stocks in the FTSE World Index
30 Sep 2025 | Source: LSEG IBES Estimates, Orbis. Analyst coverage is the number of analysts providing BHS recommendations to I/B/E/S.
Percent of surviving All Cap Equity active managers that outperformed the index over the last 10 years*
30 Sep 2025 | Source: eVestment, Orbis. *Outperformance calculated geometrically from monthly returns in USD gross of fees. Results may be overstated due to survivorship bias (exclusion of closed, merged, or no longer reported funds). Active managers in the eVestment US All Cap Equity universe (“US managers”) experienced 51% attrition over the period while active managers in the eVestment ACWI ex-US All Cap Equity universe (“International managers”) experienced 31% attrition. The MSCI All Country World Index (ACWI) ex-USA is calculated net of withholding tax. eVestment and its affiliated entities (collectively, "eVestment") collect information directly from investment management firms and other sources believed to be reliable; however, eVestment does not guarantee or warrant the accuracy, timeliness, or completeness of the information provided and is not responsible for any errors or omissions. Performance results may be provided with additional disclosures available on eVestment’s systems and other important considerations such as fees that may be applicable. Not for further distribution.
Given the lack of eyeballs on ex-US markets over the last decade, markets are rife with inefficiency and therefore opportunity for active management. Indeed, an active lens is essential given the complexity involved with investing across dozens of markets with wildly different economic, political, and regulatory regimes. While not as extreme as the immediate post-pandemic period, valuation gaps outside the US remain historically wide. In other words, the water may be changing—and with it, the direction of capital and opportunity.
“Global portfolios are still heavily concentrated in US assets and the dollar—an understandable legacy of the last cycle, but potentially a dangerous one if tides are turning.”
Orbis Investment Management Limited © 2025 The trademarks ‘Orbis’, ‘Orbis Invest Differently’ and ‘Orbis Invest Differently & Design’ are owned by Orbis Holdings Limited and used with permission by Orbis Investment Management Limited.
This is a marketing communication. Past performance does not predict future results. The value of investments in the Orbis Funds may fall as well as rise and you may get back less than you originally invested. It is therefore important that you understand the risks involved before investing. This report represents Orbis' view at a point in time and provides reasoning or rationale on why we bought or sold a particular security for the Orbis Funds. We may take the opposite view/position from that stated in this report. This is because our view may change as facts or circumstances change. This report constitutes general advice only and not personal financial product, tax, legal, or investment advice, and does not take into account the specific investment objectives, financial situation or individual needs of any particular person. This report does not prohibit the Orbis Funds from dealing in the securities before or after the report is published. You should consider the relevant offering documents including the Fund Prospectus and Key Information document (for a SICAV Fund) before making any final investment decisions. These offering documents, as well as a summary of investor rights, are available in English in the Fund Documents section of our website.