Glass Half Full

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Last November, in The American Asset Manager magazine, a well-known investment manager, C.J. Lawrence LLC, wrote an article “An American Renaissance in the President Trump Era.” The article was written before the elections but there still lingers the question: “what good can come from a Trump administration and the retreat from Globalization to nationalism?”

globalizationAccording to C.J. Lawrence, the Trump election represents a disruptive break from the post-World War ll concept of free trade, multi-lateral trade agreements and treaties will now focus on unilateralism as evidenced by Brexit and the Trump victory. The markets, so far, in contrast with most economists, seem to favor this potential new focus. We say “potential” because it is yet to be seen if actions can follow words. However, the idea of reducing regulations and corporate taxes in the US domestic economy is seen as stimulative for US companies and may offer real growth and opportunities for several US sectors.  If those changes become reality, the asset management company sees “Three Pillars of potential growth[1]:

  1. resurgence of domestic manufacturing, reversing a 40-year trend toward off-shoring to regions with lower labor costs. According to the article, from 1985 through 2011, U.S. manufacturing labor costs have actually declined by about 60% versus other developed OECD (Organization for Economic Co-operation and Development) countries. The U.S. manufacturing sector is well positioned not only because of rising labor costs in traditionally low cost countries like China, but because technological advances have changed the way we design, manufacture, and deliver goods and services.
  2. A highly attractive demographicof young Millennial workers entering our workforce. This demographic has the potential to not only be a source of competitive labor, but also provide demand for new housing, autos and services.
  3. U.S. energy independence, which is now a reality. The United States now produces enough oil and gas domestically to cover all of its energy needs. The abundance of low energy and the infrastructure to support energy independence has the potential to drive more consistent returns on capital among our leading industrial and manufacturing companies for decades to come.

The Investment management company goes on to point out that they see real opportunities for US manufacturers or suppliers to global manufacturers of machinery and parts. That is to say, although the USA many become more national in its consumption, that does not mean the rest of the world will follow suit. Trade will continue to grow with or without us. They also feel that there will be real opportunities for the large tech sector players such as aerospace and defense as well as companies that manufacture diagnostic equipment for healthcare. Finally, they see potential growth for software design, 3D printing technologies and companies that produce solutions that help streamline operations and reduce costs.

One could also say that the “retreat from globalization” may actually become the turn toward bilateral trade agreements which will make it easier for those who possess “the art of the deal” to actual grow trade at the same time helping bring down the trade deficit. The underlying political theme of more bilateral trade is to provide more asymmetrical trade negotiations.

[1] https://www.aamlive.com/blog/201611/aam-viewpoints-an-american-renaissance-in-the-president-trump-era

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