Richard Bernstein Advisors Tactical Series, American Industrial Renaissance^®, 2024-1

For many decades, American companies sent their manufacturing work overseas. However, in a trend known as “reshoring,” many companies have brought and many are continuing to bring their manufacturing back to the U.S. Some potential advantages companies have by reshoring include: higher product quality, shorter delivery times, rising offshore wages, lower inventory, and the ability to be more responsive to the change in customer demands. Gross Domestic Product from manufacturing in the U.S. averaged approximately $2,064 billion from 2005 until 2023, reaching an all time high of approximately $2,360 billion in the fourth quarter of 2023.¹

Over the years, the U.S. had become reliant on off-shore supplies for their basic needs. However, because of this, the U.S. was not prepared with necessary items the country needed during the COVID-19 pandemic. The pandemic caused companies to place emphasis on operations in their home countries and may have provided the incentive needed to bring back manufacturing segments which are considered critical for national resilience and sustainability. In 2022, nearly 344,000 jobs returned to the U.S, an increase of approximately 40% from the 2021 record. Reshoring job announcements are continuing to outpace recent records, adding 182,000 jobs in the first half of 2023.²

In 2023, the U.S. ranked #1 for power according to U.S. News and World Report. The U.S. consistently dominates news headlines and shapes global economic patterns. As you can see in the adjacent chart, and for the 12th year in a row, business leaders around the world have chosen the U.S. as the number one place to invest.³

Jobs Announced, Reshoring + F D I
Cumulative 2010 – 2023

As seen in the chart below, nearly 1.6 million reshoring and FDI jobs were announced from 2010 through 2022. With the addition of 2023, that number is anticipated to reach approximately 1.9 million. Reshoring is anticipated to continue to be key to both U.S. manufacturing and economic recovery in the years to come.

Richard Bernstein Advisors believes the following factors point to the U.S. gaining industrial market share

Wages and Productivity

The U.S. manufacturing sector has benefited from a talented workforce, advanced technology, and pro-business policies. Although labor costs in the U.S. are significantly higher than other countries, the productivity levels found in the U.S. make up for this difference and have made the U.S. an attractive location for manufacturing investment. Disruptive technologies such as additive manufacturing, 3D-printing, advanced robotics, and the utilization of the Internet of Things and Big Data are revolutionizing the U.S. manufacturing sector. This advancement in technology has not only increased levels of productivity in the U.S., but has also made the U.S. one of the most attractive locations for high-technology manufacturing firms.⁴

Quality Control, Transportation Costs and Decreased Time to Market

Some companies that have already begun to reshore have cited the benefits in having designers, engineers and sales people at the same facility rather than oceans apart.⁵ The cost of shipping parts around the world and the associated time to market can create hidden costs that may negatively impact both profit margins and market share.

¹ Trading Economics
^2, Reshoring Initiative^®
3,5  A.T. Kearney
⁴ Brookings

Energy costs

Natural gas had long been the second-most prevalent fuel for electricity generation behind coal. According to the U.S. Energy Information Administration, natural gasfired generation first surpassed coal generation on a monthly basis in April 2015. In 2024, natural gas is estimated to average a 42% contribution to electricity generation while coal is estimated to contribute 15%.

The Potential Advantage for Small Banks

Richard Bernstein Advisors (RBA) believes large U.S. banks have strayed from traditional lending sources of income, for example, investing in corporate bonds rather than making corporate loans.

RBA believes this provides a growth opportunity for smaller U.S. banks as they continue to aid U.S. capital formation. Admittedly, traditional banking typically has lower profitability ratios, but smaller U.S. banks do not need massive trading infrastructures and unnecessary global risk-taking to be profitable. Manufacturing is a capital-intensive business that requires equipment, tooling and raw materials. RBA believes manufacturers will turn to smaller banks for the financing required to hire more workers, buy new equipment and aggressively market themselves.

You should consider the portfolio's investment objectives, risks, and charges and expenses carefully before investing. Contact your financial professional or call First Trust Portfolios, L.P. at 1.800.621.1675 to request a prospectus, which contains this and other information about the portfolio. Read it carefully before you invest.

Risk Considerations
An investment in this unmanaged unit investment trust should be made with an understanding of the risks involved with owning common stocks, such as an economic recession and the possible deterioration of either the financial condition of the issuers of the equity securities or the general condition of the stock market.

You should be aware that the portfolio is concentrated in stocks in the industrials sector making it subject to additional risks, including limited diversification. The companies engaged in the industrials sector are subject to certain risks, including a deterioration in the general state of the economy, intense competition, domestic and international politics, excess capacity and changing spending trends.

The trust also invests in companies in the financials sector. The companies engaged in the financials sector are subject to the adverse effects of volatile interest rates, economic recession, decreases in the availability of capital, increased competition from new entrants in the field, and potential increased regulation.

An investment in a portfolio containing small-cap and mid-cap companies is subject to additional risks, as the share prices of small-cap companies and certain mid-cap companies are often more volatile than those of larger companies due to several factors, including limited trading volumes, products, financial resources, management inexperience and less publicly available information.

As the use of Internet technology has become more prevalent in the course of business, the trust has become more susceptible to potential operational risks through breaches in cybersecurity.

Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East, have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, the Middle East and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.

The ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future variants of the disease.

The value of the securities held by the trust may be subject to steep declines or increased volatility due to changes in performance or perception of the issuers.

This UIT is a buy and hold strategy and investors should consider their ability to hold the trust until maturity. There may be tax consequences unless units are purchased in an IRA or other qualified plan.