For investors who missed out on the rebound in equities following the financial crisis in 2008 or for those who are underinvested in U.S. stocks, opportunities may still exist according to a new whitepaper published by Charles Schwab this week. The whitepaper, entitled “Take Part in a Renaissance of U.S. Growth,” examines a domestic industrial renaissance that has begun to unfold due to a host of factors including improvements in U.S. manufacturing growth and competitiveness, a domestic energy boom, the likely end of a commodity “supercycle” and low inflation.
The whitepaper is published as a Q&A with three experts from the Schwab Center for Financial Research – Chief Investment Strategist Liz Ann Sonders, Managing Director of Market and Sector Analysis Brad Sorensen and Director of International Research Michelle Gibley. Schwab Center for Financial Research is the think-tank in Schwab’s broker/dealer that provides investors and independent advisors with Schwab’s point of view on a wide range of investing and financial planning strategies.
Key points in the new whitepaper include:
- An industrial renaissance in the United States has begun to unfold due to a host of factors, including a changing cost equation relative to China, as well as a boom in the supply of energy at a low relative cost.
- A surge in U.S. energy production is being driven by a fracking and shale boom that helps drive energy prices down and increases jobs and investment here at home. Downward pressure on energy prices also makes it cheaper for manufacturers to return business to the U.S.
- The industrial and energy renaissances should ultimately benefit the U.S. economy in multiple ways; including keeping inflation modest, boosting capital and infrastructure spending, improving job growth, lowering the trade deficit via increased exports, and improving national security.
- The beneficiaries of the industrial and energy renaissance are likely to include consumer discretionary stocks due to lower commodity prices (aided by the stronger U.S. dollar), industrials stocks due to an expected rebound in capital spending, and small capitalization stocks due to their higher domestic exposure.
According to Sonders, Sorensen and Gibley: “We sensed that many investors have written off the U.S. consumer as dead and are questioning the sustainability of the U.S. bull market in stocks. But in our view, there is a positive story about the trajectory for the country’s economy, based in part on the likelihood that the United States becomes a global economic powerhouse again in terms of manufacturing and exports.”