Experts say that here in the United States a manufacturing renaissance is beginning to take off. A recent Markit flash PMI ticked to 57.5, up from 56.4 in May. While it’s not the biggest increase ever seen, it definitely shows that manufacturing is heading in the right direction.
“The last 10 years has been about shipping goods and services overseas, and trying to get price and quantity of services and goods,” says Brian Belski of BMO Capital Markets. He believes that the next 10 years is going to be about time and quality. “We here in America can make the highest quality part much more efficiently and not have to wait to get it overseas,” Belski says, and agrees that the boom in manufacturing is set to take off, regardless of what the specific numbers happen to be.
The fact is, labor costs around the world are climbing rapidly and shipping costs are right behind them. Belski believes that this will force American companies to bring jobs back here to the United States. As far as investing in this trend, three sectors that BMO Capital Markets and Belski like are as follows:
First is Technology. Simply put, the technology sector will be providing a lot of the newer, more efficient processes that manufacturers are going to depend on in the future. “We remain the number one country in terms of patents issued in the world and we remained a technology center of the world,” says Belski. Shareholders of any tech company will definitely reap the benefits of the technological advantage that the United States has on the rest of the globe.
Second is Financials. Belski says that “At the end of the day, corporate America remains very conservative,” adding that “they don’t want to use their balance sheet because they’re still scared and they’re running their corporations like we’re still in a recession so they will go out and seek a commercial loan from a bank. Regional banks are a great place for that.”
Finally, at third there’s Industrials. It goes without saying that any manufacturing boom will also see significant gains in this sector. Belski and BMO are very keen on large conglomerates with exposure in North America, as well as the rest of the world, as any resurgence in manufacturing production will definitely have a lot of benefits for the industrial sector. Belski adds that “We think you want to own the railroads to ship the goods and services.”