America’s manufacturing sector is on the comeback trail, and the winds of change are blowing strong. After decades of decline, a new era of reshoring is emerging, where companies are bringing production back to the U.S. This shift away from globalization is not just a trend; it’s a seismic shift that’s setting the stage for a massive infrastructure boom, underpinned by substantial government investment. As Morgan Stanley analyst Chris Snyder aptly puts it, we’re only in the early innings of a reindustrialization wave that could reshape the U.S. economy for decades to come.
The infrastructure buildout is a sprawling affair, touching a diverse range of sectors and businesses. It’s not just the heavy machinery and parts manufacturers that stand to gain; transportation, materials, energy, and even tech firms are all part of this infrastructure renaissance. The pandemic served as a wake-up call, exposing the vulnerabilities of relying on international supply chains. The sight of container ships stuck in a bottleneck off the California coast in 2021 was a stark reminder of the fragility of globalization. Consequently, many companies are opting to plant their flags back home, while foreign firms are establishing manufacturing bases in the U.S. to be closer to their customers.
The federal government has recognized the urgent need for infrastructure upgrades after years of neglect. With nearly $2 trillion allocated through the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the CHIPS and Science Act, lawmakers from both parties are pushing for a revitalization of America’s aging infrastructure. This includes everything from bridges and highways to airports and the power grid. The scale is staggering: over 60,000 projects have been announced, including 10,000 bridge repairs and significant upgrades to major airports like Denver International.
As the industrial sector begins to flex its muscles again, it’s evident that the investment landscape is shifting. Companies like Caterpillar and GE Aerospace are already seeing significant gains, outperforming the broader market. The rise of artificial intelligence is also playing a role, with increasing demand for data centers driving up the stock of firms like Digital Realty Trust.
Investors are taking notice. With only about 20% of the allocated funds having been spent so far, there’s ample room for growth. We’re still in the early stages of this trend, and as Jason Adams from T. Rowe Price points out, building these projects takes time—months, quarters, even years.
The breadth of infrastructure spending means a multitude of opportunities for investors. Companies like Aecom are well-positioned to capitalize on this growth, managing major projects both domestically and internationally. With a solid pipeline of contracts and a focus on environmental and water projects, Aecom offers a stable revenue stream that could yield long-term returns.
As this industrial renaissance unfolds, the potential for growth in the sector is not just promising; it’s transformative. The U.S. is poised for a resurgence in manufacturing and infrastructure, and savvy investors should keep their eyes peeled for the companies that will lead the charge. The road ahead may be long, but the journey is just beginning, and the opportunities are ripe for the picking.
