The U.S. stock market proved its resilience last year, chugging along steadily despite several fast-paced interest rate hikes. As 2024 has begun, the economy has continued to display signs of strength, with one important tailwind in reshoring supply chains. Reshoring U.S. manufacturing and infrastructure investment are together boosting industrial investing, which may call for investors to consider an industrials ETF.
See more: Blue Chip ETFs: After a Great 2023, Now What?
What exactly is reshoring? Following the global COVID-19 pandemic’s impact on supply chains and simmering geopolitical risks to those supply chains, many U.S. firms are adjusting supply chains to be more resilient and more profitable. Indeed, a recent survey of manufacturers by Medius found that some 69% of manufacturers have begun reshoring their supply chains.
Alongside the rapid ascent of generative AI programs, reshoring has helped provide a notable boost to domestic manufacturing outlooks. At the same time, the 2022 Inflation Reduction Act and the 2021 Infrastructure Investment and Jobs Act have committed the Federal Government to invest significantly in infrastructure projects, including electrification, for example.
The Case for an Industrials ETF
So what, then, might be the outlook for industrials this year? Earlier this month, the ISM Manufacturing Index showed some signs of positivity. Following more than a year of contraction, the index is very close to entering overall growth territory. The New Orders index, which measures future demand, has already entered into “growth” mode at 52.5.
The combination of infrastructure, semiconductor and clean energy tech, reshoring, and other industrials investing could speak to the case for an industrials ETF like the Fidelity MSCI Industrial Index ETF (FIDU). FIDU charges just 8.4 basis points to track the MSCI USA IMI Industrials 25/25 Index.
In doing so, it has returned 16.6% over the last three months as of February 8th. That has outperformed its ETF Database Category and FactSet Segment Averages per VettaFi data. Should reshoring and other industrial trends continue, which appears quite possible, FIDU could be worth keeping an eye on in the weeks ahead.
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