CoTD_ Shifting Global Capex Trends Provide US Reshoring Evidence

Summary of Key Points from the Conference Call Industry Overview - Industry: Multi-Industry, focusing on North America - Key Trend: US Reshoring evidenced by a significant shift in global capital expenditure (capex) trends since 2018 [1][3][7] Core Insights - US Capital Formation: The US has gained approximately 200 basis points (bps) in global investment share since 2018, reversing decades of decline, with total global investment around $30 trillion annually [3][7] - Incremental Capex Share: The US has captured about 30% of incremental global capex since 2018, a nearly threefold increase compared to the period from 1999 to 2017 [7][8] - Profit Growth Potential: The US Industrial sector is expected to grow profits at an accelerated rate, with projections suggesting a potential 10x profit uplift due to favorable capex trends [3][8] Economic Drivers - Policy Impact: The Trump administration's tariffs and the COVID-19 pandemic have highlighted the need for supply chain resiliency, contributing to the reshoring trend [3][8] - Trade Deficit Strategy: The ongoing trade negotiations aim to address the $1.2 trillion trade deficit by increasing domestic production and investment, which presents opportunities for companies focused on the US market [8] Market Positioning - Investment Recommendations: Favorable outlook on US companies involved in capex, with specific recommendations for companies like Trane Technologies (TT), Eaton Corporation (ETN), Rockwell Automation (ROK), and Johnson Controls International (JCI) [8][70] - Caution on International Exposure: A more cautious stance on international investments due to uncertainties in capacity expansion when the US market is contracting [8] Additional Insights - Manufacturing Disconnect: Despite the US Manufacturing PMI being in contraction for over two years, the US Industrial coverage has shown healthy organic growth, indicating a disconnect from broader manufacturing trends [15][8] - Historical Context: The US has historically lost market share to China since its WTO entry in 1999, making the recent gains particularly significant [3][13] Conclusion - The US is experiencing a notable shift in capital expenditure trends, with implications for domestic production and investment strategies. The reshoring trend is expected to be durable, providing a favorable environment for US industrial companies to thrive in the coming years [3][8][7]