Manufacturers are bracing for possible policy changes that could change the trajectory of the industry for many years. The US Presidential election is just days away.
Many firms are cautious about unknowns. This is especially true when it comes to trade policy under possible Trump tariffs.
On the other hand, a Democratic victory could maintain the status-quo.
For now, the industrial stocks of the Russell 1000 (excluding Boeing) are expected to rise by 22% between 2024 and 2030, which is similar to the S&P 500.
The market values them at about 21 times the estimated earnings for 2025, but they trade around 25 times that.
Barron’s reported that Timothy Fiore was the chairman of ISM’s PMI Survey, which is a survey conducted by Institute for Supply Management (ISM). “Demand is still subdued as businesses are unwilling to invest in inventory and capital due to uncertainty surrounding federal monetary policies…and elections,” Fiore said.
Demand for AI and Aerospace expected to remain steady
The manufacturers this year have benefited from significant spending on infrastructure for electrification, artificial intelligence and automation.
Aerospace suppliers are benefiting from the growth of AI datacenters as major tech companies invest billions in equipment.
The demand for AI and aerospace is expected to remain steady until 2025, despite the general industrial slowdown.
Boeing, however, has not had the best of years. The stock of Boeing has fallen by 41% in the past year, despite gains across other industries, due to production and quality problems, along with a union strike.
The company is facing its own challenges, such as increased regulatory scrutiny, production restrictions, and a high level of demand.
Trade wars could be triggered by potential tariff changes
If Donald Trump wins the election, Trump’s plans to increase tariffs could pose new challenges.
On the surface, his strategy of bringing more manufacturing to the US via tariffs might seem to be beneficial.
It is true that increased tariffs can often lead to retaliation. A new trade war, in particular, could affect some of America’s largest manufacturers.
China Southern Airlines, which operates around 200 Boeing 737s, is a large customer of Boeing.
Beijing could halt Boeing future orders if new tariffs affect US-China relations.
Boeing, which is not a European manufacturer of aircrafts, could also be affected by tariffs levied on European manufacturers.
Airbus could gain an advantage in a similar scenario due to the fact that it has operations in the US.
Tariffs may not affect suppliers like GE Aerospace who supply both Airbus and Boeing. However, they also want to avoid any disruptions due to Boeing production or geopolitical uncertainty.
Although reshoring creates jobs, the industrial growth remains low
Over the last few years, efforts to increase US manufacturing by implementing tariffs and other government policies has yielded results.
Since Trump’s first term in office, the number of jobs has increased as firms ramped-up domestic production for semiconductors, automobiles and batteries.
US manufacturing employment increased from 12,4 million at the end 2016 to 13,9 million in September 2024. This growth was consistent under both Trump and Biden administrations.
Reshoring hasn’t been enough to solve the industry’s larger challenges.
The performance of large companies like Rockwell Automation, Honeywell and others has been below the S&P500 over the last two years with returns of only 8 percent on average.
The ISM PMI, which measures manufacturing growth and is published monthly, was above 50 in only one of the last two years. This shows a serious industrial decline.
Low interest rates will be short-term positives
Manufacturers remain cautious despite the election.
The industry could benefit from lower interest rates in 2025. This is likely to boost the capital spending and the order volume.
In a report published by Jefferies, Saree Boroditsky wrote: “Orders are expected to increase in 2024 after the US elections and following interest rate reductions due to historically high capacity utilization levels across durable goods manufacturers.”
Manufacturers are preparing for the new year and hope for continued policy stability as well as interest rate reductions.
All eyes will be on the results of the elections, as they can either boost or hamper growth.
The post Boeing, GE and other major US industrial stock after the elections? This post may change as new information unfolds
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