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Who Are The “Reshoring”/”Nearshoring” Winners?

Who Are the “Reshoring”/”Nearshoring” Winners?

Who Are the “Reshoring”/”Nearshoring” Winners?

The rise in global geopolitical risk and the exposure of supply chain vulnerabilities uncovered by the COVID-19 pandemic has U.S. corporate America rethinking its approach to off-shore manufacturing. In this latest edition of LPL Street View , LPL Chief Investment Officer and Director of Research Marc Zabicki takes a brief look at the concepts of reshoring and nearshoring, two efforts some U.S. corporations are taking on to reduce risks associated with bringing products to market. Reshoring is the concept of bringing manufacturing activity back on to U.S. soil in an effort to reduce rising production and supply chain vulnerabilities in places such as China and other countries with volatile political, financial, and regulatory landscapes. Nearshoring is a similar effort in that manufacturing activity is brought closer to the U.S., but production may still reside in countries that represent lower costs of production. Management teams in U.S. industries, such as semiconductors, steel/aluminum, automotive, medical devices, and appliances, have taken recent steps to reshore or nearshore production activity. The question is who are the key winners here, and where can you invest to take advantage of this prevailing trend? We believe Latin American countries may be a logical place for ongoing investment. If one is considering redirecting manufacturing activity from one location to another, our first choice in Latin America may be Mexico. Foreign direct investment in Mexico continues to trend in a positive direction; total manufacturing costs are some of the lowest in the world, and the economic, political, and financial risks in Mexico are more palatable than in other countries. While we are still cautious on emerging markets overall, we believe Mexico’s equity market may be showing signs of life based on the nearshoring trend. Finally, we think U.S. industrial companies will be key winners in the reshoring trend, and the industrials sector is the segment we tactically favor at this time. Why? Because many U.S. industrial companies are being and will be employed to build new infrastructure. U.S. companies are expected to boost capex by 6% in 2023, following a 20% gain in 2022. We believe this should provide a tailwind for industrials stocks. Over a trillion dollars in U.S. government spending on the infrastructure reshoring effort certainly helps as well. You may also be interested in: Read. Listen. Watch. Keep up with economic insights from the LPL Research team. Read Weekly Market Commentary. Listen to Market Signals Podcast. Watch Street View. Find Out What’s New IMPORTANT DISCLOSURES This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth in the podcast may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. All indexes are unmanaged and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. All index data is from FactSet. The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. This Research material was prepared by LPL Financial, LLC. Member FINRA/SIPC For Public Use — Tracking # 1-05360998

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Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

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