America's Industrial Engine Is Roaring Back

Editor's note: China may still dominate global manufacturing, but the U.S. is mounting a powerful comeback. According to Joel Litman, chief investment officer of our corporate affiliate Altimetry, America is entering its biggest domestic investment cycle in decades. In this issue – adapted from the free Altimetry Daily Authority e-letter – he explains how this revival could spark major opportunities for investors...

China has spent the past two decades transforming itself into an industrial superpower...

The country now controls more than 40% of global refined copper, lithium, and rare earth metals. These resources are essential for making everything from electric vehicles to fighter jets.

It's almost impossible to exaggerate how powerful Chinese industry has become. Last year, a single Chinese shipbuilder produced more tonnage than the entire U.S. shipbuilding industry has managed since World War II.

And with 162 million factory workers as of 2023 – nearly triple the combined total of all NATO countries – its manufacturing dominance looks unshakable.

China's rise has triggered alarm bells across the Western world. In a future conflict, industrial scale might matter more than technology.

That's why the U.S. is taking a step it hasn't taken in decades: rebuilding its industrial base...

The U.S. is entering its biggest domestic investment cycle since before the Great Recession. Each of the past three administrations has taken steps to reignite domestic production.

In his first term, President Donald Trump implemented Section 232 tariffs on imported steel and aluminum. That pushed manufacturers to source metals from within the U.S.

Joe Biden followed this up with the Infrastructure Investment and Jobs Act. The bill unlocked $1.2 trillion for American roads, railways, broadband, and clean-energy projects.

And as we know, in his second term, Trump has doubled down on tariff-driven policies. He's expanding duties on foreign-manufactured goods to incentivize local production.

These efforts are designed to make domestic sourcing more competitive. And they aim to further discourage U.S. companies from relying on offshore suppliers.

And while it takes time for initiatives like these to sway the economy, we're starting to see some changes...

Aging Infrastructure Is Igniting America's Next Investment Cycle

To get a better sense of what's happening, we can look at the net-to-gross property, plant, and equipment (PP&E) ratio for the whole U.S. economy.

Gross PP&E represents the value of a company's assets when they were acquired. Net PP&E reflects their current value. So the ratio indicates the age of the assets... The lower the ratio, the older they are.

It's a good indicator of the amount of money we're investing in our country.

In 2001, the net-to-gross PP&E ratio sat between 58% and 59%. Said another way, the average company's assets were roughly 40% through their usable life.

By 2010, that metric dropped to between 56% and 57%. While it started ticking up by the end of Trump's first term, the pandemic took a toll. Companies put their investments on hold.

And by early 2021, as we emerged from the worst of COVID-19, the net-to-gross PP&E ratio had dropped to 54%.

But that trend started to reverse in 2022. The age of assets initially fell slowly... then really took off mid-last year.

We haven't seen acceleration like this since before the Great Recession...

Companies are investing heavily in domestic factories, logistics centers, and supply chains. Trends like data-center build-outs are accelerating the rise even faster.

It's hard not to look at China's scale and feel like the U.S. is falling behind. But the current administration is still pushing for investment, so this cycle could last for years.

But scale alone doesn't determine leadership. The U.S. is still the world's best growth engine. We're regaining the capabilities that once made us the global industrial leader.

Decades of neglect left U.S. industry brittle. Now, capital is finally flowing back in.

Companies are retooling their manufacturing hubs. Strategic sectors, like semiconductors and shipbuilding, are getting their first significant reinvestments since the 1990s.

The data is clear. Asset investment is accelerating across the board.

U.S. businesses are preparing to compete... and thrive.

Regards,

Joel Litman

Editor's note: In an unprecedented move, the U.S. government – the richest entity in history – is now buying shares of select American companies... sending some stocks soaring up to 200% overnight. Wall Street is following fast, pledging more than $1 trillion to back what's being called the "White House Buy List."

On November 18, two of the world's most connected investors will reveal which companies could be next in line – and how this new era of government-fueled investing could hand early movers their biggest gains of the decade.