The stock market is buzzing with excitement as investors bet on a resurgence of manufacturing in the United States, fueled by the potential impact of Donald Trump’s election victory. Companies focusing on bringing production back to American soil have seen their stock prices soar this week, driven by expectations of more protectionist policies from the new administration.
The American Reshoring ETF (RSHO), a fund investing in 30 companies committed to reshoring their production lines back home, jumped over 8% in the week, outpacing broader market indices like the SPDR S&P 500 ETF Trust (SPY) and the iShares Russell 2000 ETF (IWM), which both saw gains of 5%. This surge in the RSHO is a clear indication of investors’ growing confidence in a reshoring boom.
A Shift Towards Domestic Production
Maurits Pots, CEO of Tema ETFs, believes the Trump administration’s policies will create a favorable environment for reshoring. In an exclusive interview, Pots highlighted the shift in companies’ thinking, moving from prioritizing the lowest cost of production to seeking more secure and geographically closer manufacturing options. This shift stems from the perception that supply chain security is increasingly outweighing cost considerations.
The new administration’s focus on trade protectionism and potential tariff increases is seen as a key driver of this reshoring trend. Companies are now looking to protect themselves from the uncertainty and potential disruptions of global supply chains, prompting them to prioritize domestic production.
Heavy Equipment Manufacturers Lead the Charge
The optimism surrounding reshoring is evident in the performance of heavy equipment manufacturers, often considered bellwethers of industrial sentiment. Caterpillar (CAT), a major player in the construction and mining equipment industry, saw its stock rise over 8% post-election. This indicates a strong investor interest in U.S. industrial stocks, anticipating increased investment in domestic manufacturing.
Similar trends are observed in other equipment companies, such as Terex Corp. (TEX), which have also experienced significant stock gains. This reflects market expectations of a reacceleration in American capital expenditure, a key focus point for the Trump administration.
Mexico’s Appeal Diminishes Amidst Tariffs
The Trump administration’s policies could also discourage “nearshoring”, the trend of moving production closer to the U.S. but not within its borders, often to Mexico. Proposed tariffs on Mexican goods might diminish the appeal of Mexico as a manufacturing hub, further driving interest in truly domestic production.
It is noteworthy that most of the reshoring incentives introduced during the Biden administration, including significant investment packages like the CHIPS Act, have been concentrated in Republican-led states. This aligns with the Trump administration’s agenda of strengthening U.S. manufacturing, potentially protecting these initiatives from potential rollbacks.
While there is uncertainty surrounding the exact impact of the new administration’s policies, one thing is clear: the reshoring trend is gaining momentum, and investors are betting big on the resurgence of American manufacturing.
