2020s — still the decade of the cheap asset?

Five years ago, we set out a simple story: the 2010s were the decade of the ‘safe asset’; the 2020s were set up to be the decade of the ‘cheap asset’. That call was never about a calendar trick; it was about regime and market drivers.

Rates at (or below) zero, supply chains optimised for price rather than resilience, and narratives that favoured duration over valuation had stretched the market’s valuation divide to its limits — and, like a rubber band, we argued it would snap back. It did, and the world today looks structurally different, even if some headline indices try to persuade otherwise.

Our 2020 article leaned on a few big drivers: an end to the 40‑year interest rate glide path, a retreat from globalisation, and a re‑pricing of monopoly‑adjacent ‘safe assets. Those forces have not reversed; if anything, they have deepened: capital has a cost again, policy now has a price and supply chains have a border. None of this is deflationary, and none of it is friendly to long-duration cash flows on high multiples.

“…capital has a cost again, policy now has a price and supply chains have a border.”
 

The 2010s taught markets to discount the future almost indefinitely. That habit broke. A higher discount rate and bigger risk premia do quiet work¹: they nudge capital back towards businesses that earn today, own assets that matter in the real world, and can reinvest at returns above their cost of capital.

That is not a fad; it is arithmetic. However, this shift doesn’t arrive as a neat rotation. It comes in surges, corrections, and reconsiderations — enough volatility to make trend-following uncomfortable and bring valuations back into focus.

De-globalisation is not a headline — it’s a capex plan

Five years ago, investors were asking whether the US‑China trade war marked the peak of globalisation. Today, the question feels quaint. Friend‑shoring, redundancy, critical‑mineral policy, export controls — this is the new operating system. It is expensive by design, channelling investment into fixed assets, logistics, and domestic resilience. That is a structural bid for what used to be unglamorous. It also compresses the moat of businesses built on seamless global platforms and marginal cost of capital near zero. 

Energy transition meets gravity

In 2020, the market priced a smooth path to net zero; however, the past few years have brought wars, weather and politics. The energy transition is no longer a straight-line journey — it’s facing real-world friction. Projects that pencilled at free money now ask harder questions about duration and returns on equity investment. The result hasn’t been a rejection of transition, but a repricing of pace and mix. Flexibility, diversification, and sequencing matter more than single‑track purity. Optionality has value in a world where policy, input costs, and grids are all moving targets. The cheap asset thesis lives comfortably here: capital discipline and real returns beat singular narratives when money costs something. 

Quality compounders in a new regime

The last decade crowned a cohort of ‘quality compounders’ as the safest of safe assets, backed by growth algorithms that seemed to run on rails and valuations to match. Pricing power, distribution depth, and stable earnings drew investors toward duration, pushing multiples ever higher as the cost of capital approached zero. 

That regime, in our view, is being quietly flipped. Inflation let many raise prices aggressively; growth has slowed into the higher‑rate reality, leaving elevated sticker prices rubbing up against weaker volumes and tougher comparisons. Multiple compression is now exposing where quality was the narrative, not cash economics, and where working capital and leverage were stretched to defend appearances of smooth compounding. 

The paradox of dominance

Five years ago we asked whether a market where a handful of giants represent a quarter of the S&P 500 Index was capitalism or an exhibit. That share has not shrunk; rather it has grown, driven by a new growth algorithm in AI with the capex to match. The less obvious part is what this does to risk. When the market pays for certainty, it asks for perfection. Perfection is a high bar in a world that is noisier, more regulated, and more expensive. 

History also tells us that leadership isn’t static and in an environment where the timeframes to business success (and failure) appear more condensed than ever, we’d argue that being on the right side of valuation doesn’t just provide significant downside protection, it also offers the opportunity to capture significant upside for the contrarian investor. 

Meta’s round‑trip over the past five years serves as a reminder that narrative, multiple, and cash flow can move out of sync — and then violently back again. 

Value remains widespread 

While the prices of some ‘cheap assets’ have clearly moved, the value opportunity, in our opinion, still remains significant and widespread.  

The mindset shaped by the previous regime continues to linger. European banks are a good tell: re-rated, yes, but many still trade on single‑digit multiples when they are forecast to deliver sustainable mid‑to high‑teens returns — a spread that suggests investors are yet to fully believe in a world where capital costs something and earns something in return. 

Rates may be on the downward path, but a return to zero feels unlikely absent a significant shock; policy and politics have moved, and the floor is higher than a decade ago.

Markets that spent years priced for neglect have also reawakened. Japan and Korea — long the poster children for cheapness and easily ignored by many global investors — are now explicitly pushing for better governance and returns to shareholders. That is not a one‑quarter story; it is the kind of slow, compounding change that attracts capital over time as investors recognise the universe of global companies delivering sustainable returns above the cost of capital is much broader than just those sitting in the US.

AI and mega‑cap concentration remain the paradox of the age. The capex is real, the narrative is powerful, but which players can best demonstrate utility remains an unanswered question. But even here, cheap assets surface in the slipstream, especially in the inevitable points where expectations and delivery diverge. 

“AI and mega‑cap concentration remain the paradox of the age.”
 

At the same time, some ‘quality defensives’ that were untouchable, in our view, at their valuations in the 2010s are finally clearing the bar for disciplined capital. As is often the case, over-exuberance towards a narrative is often replaced with a similar level of reticence by investors and after resets in earnings and expectations, this narrative has set in for many.

A subset now screens as genuinely investable, with balance sheets and working capital that look like anchors rather than leaks. The attraction is not a rediscovered growth algorithm; it is an entry price that doesn’t require one.

Value still matters 

While much has changed over the past five years, the world remains dominated by assets priced for perfection. In such an environment, a diversified collection of genuinely cheap, globally diverse assets functions as more than a style bet; it is risk control. It diversifies against narrative, against concentration, and against the assumption that yesterday’s leaders must be tomorrow’s.

The cheap asset idea is not a call for indiscriminate value. It is a preference for cash returns over promises, for businesses that do not depend on frictionless globalisation, for reinvestment that clears a non‑trivial hurdle, and for entry prices that build in human error. It includes parts of the financial system that can now earn; parts of the industrial economy that policy and security require; parts of technology’s plumbing that get paid before the platform; and, selectively, those quality defensives whose prices have finally rejoined their cash flows.

The decade of the cheap asset is less a headline than a way to navigate — to accept dispersion as an opportunity, to let price do some of the work, and to remember that the most durable edges are usually bought, not proclaimed.