Mark and Elise Levy’s May Economic Update
An American Industrial Renaissance is taking place to some degree. LPL Research has produced these bullet points to educate us on the pros and cons of this unfolding event. The obvious plus is the equity markets are at all-time highs, despite Iranian uncertainty and the fears associated with it. Many investors are surprised by this rise, so we thought this list would provide some understanding of the economic forces at play:
Positive Factors
Rising U.S. Manufacturing Investment: Companies are building more factories and production facilities in the U.S., with spending nearly tripling since 2021 — evidence this trend extends beyond political talk.
Stronger Supply Chains at Home: After COVID-19 disruptions, companies are reducing reliance on China by shifting production closer to home or to nearby countries, improving reliability for critical goods.
Supportive Government Policies: Programs like the Infrastructure Act, CHIPS Act, and Inflation Reduction Act are encouraging companies to invest in U.S. manufacturing, with support from both political parties.
Lower Energy Costs vs. Other Countries: The U.S. benefits from abundant natural gas and electricity that remains significantly cheaper than in Europe or Asia, helping domestic manufacturers stay competitive.
Concerning Factors
Not All Manufacturing Is Returning to the U.S.: Much of the shift is “nearshoring” (moving production to Mexico or nearby countries), not full reshoring, so the renaissance is selective, not universal.
Limited Job Growth from New Factories: Modern manufacturing relies heavily on automation and robotics, meaning higher investment does not necessarily translate into large numbers of new jobs.
Rising Costs from Trade Policies: Tariffs may help U.S. producers, but they also increase costs for companies that still rely on imported parts, potentially squeezing profit margins.
Energy Cost Advantage May Shrink: Growing energy demand from data centers and exports could push U.S. energy prices higher over time, reducing today’s cost advantage.
LPL Research’s Perspective
A Partial, Not Total, Renaissance: LPL Research believes the U.S. is seeing a real manufacturing revival but not a full reversal of globalization.
The Strongest Evidence Lies in Spending and Capacity: Sustained increases in factory construction and production capacity points to genuine progress, particularly in technology and electrical equipment.
Benefits Will Be Uneven: Some companies are well positioned to benefit from domestic investment, while others may see smaller or little impacts.
Implementation Matters for Investors: Investing in this theme successfully depends on choosing the right exposures — companies and sectors tied to U.S. infrastructure, power, and manufacturing investment rather than global industrial activity.
As you can see, it’s complicated, but the overall thinking is many of these changes are good for Americans and we will see benefits in the future as this renaissance evolves.
- Mark and Elise
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All information is believed to be from reliable sources; however, LPL makes no representation as to its completeness or accuracy. This research material has been prepared by LPL Financial LLC. Tracking number – #1100323 (Exp. 4/27).