What's Happening?
Societe Generale has identified significant catalysts that could drive the reshoring of companies' operations back to the United States in 2026. According to strategist Manish Kabra, the recently enacted 'One Big Beautiful Bill' provides a 100% bonus
depreciation for qualified properties acquired and placed in service after January 2025. This measure reverses the phasedown schedule from the Tax Cuts and Jobs Act, offering immediate tax savings and improved cash flow for companies. Additionally, the U.S. is witnessing a surge in investment activities, with $8.9 trillion announced from both domestic and foreign entities. Non-residential construction spending is currently low, but with expected Federal Reserve rate cuts, an acceleration in construction spending is anticipated. Societe Generale has also developed the SG US Reshoring thematic equity index, focusing on S&P 500 companies with significant U.S. revenue and exposure to non-residential investment growth.
Why It's Important?
The reshoring trend is poised to significantly impact the U.S. economy by boosting domestic manufacturing and investment. The 100% bonus depreciation is particularly beneficial for companies, as it allows for immediate tax deductions, enhancing cash flow and encouraging further investment in U.S. operations. This could lead to increased job creation and economic growth. The substantial investment activity and potential rise in construction spending could further stimulate the economy, benefiting industries such as defense, semiconductors, and energy. Companies like Eaton, Emerson Electric, Nucor, and Ameren, which are part of the SG US Reshoring index, stand to gain from these developments.
What's Next?
As the reshoring trend gains momentum, companies are likely to increase their investments in U.S. operations, potentially leading to a more robust domestic manufacturing sector. The Federal Reserve's anticipated rate cuts could further accelerate construction spending, providing additional economic stimulus. Businesses in critical industries may continue to benefit from these trends, while policymakers might focus on creating more incentives to support reshoring efforts.
