Chart Talk: November 8, 2023


Over the last decade, geopolitical tensions have been on the rise and as a result, deglobalization has become a buzzword in both political and economic spheres.  We have witnessed the disbandment of NAFTA in 2020 by President Trump as well as a deterioration in trade with China.  Next came the CHIPS and Science ACT signed into law by President Joe Biden on August 9, 2022, which provided $280 in new funding, aimed to bring domestic research and manufacturing in the semiconductor industry back to the United States, which has historically been outsourced to China and other eastern countries.  As you can see from the chart below provided by Bank of America, it is the first time in over a decade that the United States is importing more from Mexico than it is from China.  In our opinion, this illustrates the seismic shift in how the United States will be conducting business in the future, and who we align ourselves with economically.  Although, from an input perspective, we will miss China’s labor costs, we believe bringing manufacturing back home will be fundamental in the growth of America, especially the middle class.

Global Foundries, a leading local semiconductor manufacturer recently had earnings in which the CEO, Thomas Caulfield was quoted saying “Although the global economic and geopolitical landscape remains uncertain, we are collaborating closely with our customers to support their efforts to reduce inventory levels, while growing long-term partnerships.”  We also have Intel, another leading semiconductor manufacturer planning to build a $20 billion plant in Ohio, in addition to pledging $100 million toward educational partnerships, once again aimed at bringing manufacturing jobs back to the United States.  Both companies acknowledge the need to reduce reliance on foreign manufacturing to reduce the risks to our national security.  

We believe we will continue to see investment in bringing corporate manufacturing back to the U.S. which could add to short-term inflationary pressures, but in the long-term reduce U.S. involvement in global conflicts and help rebuild the middle class. The loss of the middle class over the last few decades, coupled with the “death” of the pension, breed social discourse, which could in turn lead to a black swan event in the stock market.  We believe bringing jobs back home is key to a better America, both economically and socially.  

This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.

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