October 2023
A resurgence in U.S. manufacturing is underway, as companies seek greater supply-chain resilience by reshoring their global operations.
The Opportunity
The supply chain vulnerabilities exposed by Covid and rising geopolitical tensions have accelerated the reversal of three decades of globalization. U.S. companies across multiple industries are reducing their dependence on China by bringing factories back home and closer to the end consumer or housing them in allied countries.
This is spurring a resurgence in the U.S.’s long-neglected domestic production base, and the alignment of manufacturers’ priorities with more than $1 trillion of government tax credit and funding support over the next decade. The revival of manufacturing could generate $500 billion of annual economic activity and significant investing opportunities among the beneficiaries of this capital expenditure.
Key Stats
Reshoring Basket
The basket consists of an equal-weighted and diversified portfolio of 20 companies. Investment opportunities can be found across the industrials, health care, information technology, utilities, financials and REIT sectors, and fall into four categories: equipment and buildings, automation and software, logistics and warehousing and financial services.
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Footnotes:
1BofA Global Research. As of June 1, 2023
2United States Census Bureau. As of September 1, 2023
3Reshoring Initiative Library data. As of December 31, 2022
Potential Risks
Daily pricing: On a daily basis, the Delta-one note will move up and down 1:1 with the underlying basket of stocks. Due to market factors, the Delta-one note will be valued at intrinsic value only at maturity.
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Limited liquidity: BNY Mellon Wealth Management will source liquidity both from the issuers and the secondary market. However, liquidity is not guaranteed. Investors should be prepared to hold the security through maturity.
Dividends/gains excluded: While dividends are not paid, there is an adjustment factor, paid at maturity, that will incorporate some of their value. The amount is specified upfront and fixed for the duration of the note.
Tax considerations: A tax opinion is included in the prospectus of each deal, which is typical of long-term capital gains for investments held for more than one year.
Returns of a Delta One Note will differ based on expiration dates and market conditions. Investors should read the applicable information statement or prospectus documents (including prospectus supplements and pricing supplements) carefully before investing.
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