I hope this note finds you enjoying some of the great benefits of the summer – a little slower pace, time with friends and family, AND watermelon - as we are about to celebrate America’s 250th birthday. Julia, the boys, and I are seeking a little less heat and humidity, so we are headed to Colorado to play in the mountains later this week.

With such a big milestone of 250 years, I find myself contemplating all the facets and history that have made America such an incredible country that I grateful to be a citizen of and also that Julia and I are privileged to raise our boys here. While we are certainly a work in progress, the blessings of being an American far outweigh our issues.

When we examine the economy, markets, and business environment of our great country with the same historical lens and perspective, it allows for an interesting investment framework to develop.  In recent history, investors have faced no shortage of distractions — inflation, rising interest rates, geopolitical tensions, elections, and now artificial intelligence. But quietly unfolding beneath all this noise is one of the most important economic transformations in decades: the reshaping of global supply chains and the reindustrialization of the United States.

For most of the past 40 years, the global economy moved in one direction: offshoring. Lower labor costs, global trade expansion, and just-in-time supply chains pushed manufacturing further and further from U.S. shores. That model delivered lower prices and higher margins — until it didn’t.  The pandemic exposed the fragility of that system.

What began as a reaction to pandemic-era disruptions has evolved into a full-scale reshoring and nearshoring movement that is now changing how and where goods are made. And more importantly, it’s becoming a long-term economic tailwind for domestic investment, job creation, infrastructure, and energy demand. Reshoring and nearshoring of the global supply chains along with the reindustrialization of America is now a structured multi-decade investment cycle.

Sometimes long-term trends are hard to spot because they unfold slowly. This one is not subtle.  Across technology, pharmaceuticals, industrials, energy, and advanced manufacturing, companies have already announced well over $1.5 trillion in multiyear reshoring and nearshoring commitments. These are not press-release gestures — they are funded, permitted, and under construction.

Governmental policy is no longer negative or neutral – its’ actively pro-industrial. For the first time in decades, both corporate strategy and governmental policy are in alignment. A few examples of forces working together are noted below:

• CHIPS & Science Act – reshapes domestic semiconductor manufacturing
• Inflation Reduction Act – massive incentives for clean energy, grid investment, and domestic production
• Infrastructure Investment & Jobs Act – the largest infrastructure spending bill in generations
• Tariff and trade policy – reprices geopolitical risk into supply chains

Combined, these programs change the math for corporate boards. The economic case for building at home is now materially stronger than it was even five years ago.

AI Is Driving the Most Infrastructure-Intensive Boom Since WWII

Artificial intelligence is often described as a digital revolution. In reality, it is one of the most energy and infrastructure-heavy expansions ever undertaken. Below is one of the most important investment implications of AI — and one of the least discussed.

Behind every AI model is:

• Massive high-density data centers
• Thousands of advanced chips per facility
• Gigantic cooling, backup power, and grid interconnections
• 24/7 baseload electricity demand

To understand the scale:

• U.S. data center electricity demand is expected to triple by 2030, reaching roughly 309 terawatt-hours — the equivalent of powering about 40 million homes. That’s about 1/3 of our housing here in the United States.
• The International Energy Agency projects that by the end of this decade, data centers will consume more electricity than the entire U.S. production of aluminum, steel, cement, chemicals, and all other energy-intensive industrial goods combined.

Utilities & Infrastructure: The Quiet Center of the Storm

This transformation requires massive investment in transmission expansion, substations, new generation capacity, renewable integration, and energy storage. Electricity demand is now being driven simultaneously by a myriad of industries and factors: AI data centers, electric vehicles and their manufacturing, advanced semiconductor fabs, electrified industrial process, grid-scale energy storage, and onshore manufacturing.

This translates into hundreds of billions of dollars that must be invested in transmission expansion, substation upgrades, new baseload generation, renewable integration, energy storage and grid resiliency. 

This is why utilities and infrastructure now sit at the heart of the reshoring story. They are no longer simply “defensive” holdings. They are strategic enablers of national economic growth.

Small-Cap Industrials & Materials: The Backbone of the Buildout

The large companies may build the factories — but the physical economy is assembled by smaller industrial suppliers. Smaller companies produce specialty chemicals, construction materials, industrial equipment, and automation systems that enable this entire transition. Examples include high-performance coatings and specialty chemicals, industrial adhesives and composites, precision components and machined parts, electrical equipment and control systems, cement products, and engineered materials.

Many of these companies are seeing multi-year project pipelines, record backlog visibility, and less cyclical/more sustained pricing power tied to longer project timelines. Because these businesses sit outside the mega-cap universe, I believe they offer some of the more compelling growth stories and interesting long-term opportunities within this economic shift.

Why This Matters for Investors

From an investment standpoint, reshoring and nearshoring represent a rare alignment of powerful long-duration forces: national security priorities, corporate capital spending, energy transition, AI infrastructure, workforce transformation, government incentives, and infrastructure modernization.

Together, I believe they are creating multi-year opportunities across a wide landscape of investments that are outside the traditional, large-cap technology and communication space.  Sectors to consider include infrastructure, utilities, small-cap industrials, materials, along with select industrial technology and automation firms. Importantly, these opportunities are driven less by short-term interest rate decisions and more by long-cycle capital investment and national economic priorities.

Final Perspective

Every decade has a defining investment theme. In the 1990’s it was globalization. In the 2000’s, housing and finance. In the 2010’s, software and platforms. This decade may be defined by something far more physical: America rebuilding its industrial and energy backbone.

Reshoring and nearshoring are not political narratives. They are now financial commitments, construction sites, transmission lines, factories, and job creation. The capital is already flowing. The infrastructure is already being built. And the power demand is already accelerating.

We believe this transformation provides one of the clearest long-term investment roadmaps for the next decade — and we look forward to positioning portfolios thoughtfully within this trend.

Thank you for your continued trust and confidence. If you have any questions, comments, or we can be of any assistance, please do not hesitate to reach out to us.

Best personal regards.

Erik M. Melville, CFP®

Senior Vice President/Investments

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