Page 10 - ISQ October 2022

INVESTMENT STRATEGY QUARTERLY

S&P 500 Companies Mentioning ‘Offshoring’
S&P 500 Companies Mentioning 'O shoring' During
During Earnings or Conference Calls
Earnings or Conference Calls
400
350
300
250
200
150
100
50
0
2012 2014 2016 2018 2020 2022
Source: FactSet, as of 20/09/2022
that if attacked, Taiwan would, at the very least, reduce its while the US and other developed economies will likely be able to
production and export of goods and if factories were to be damaged, shift their trading needs to other countries, the impact of this
it could take a while for them to come back online. This is not to say transition would surely be substantial. In fact, an adjustment of this
that a war between these two nations is about to erupt, as we nature would be certain to take time, and, in simple economic
believe it is in neither country’s best interest. However, we saw how terms, limited competition would ultimately lead to higher prices.
quickly the situation precipitated in Europe earlier this year, and
that’s why investors need to be prepared for all sorts of outcomes. MADE IN AMERICA
With two massively disruptive events in just over two years and the
A conflict between Taiwan and China, and the probable potential for a multitude of unpredictable events brewing in the
involvement of other global superpowers, would have all sorts of future, nations are starting to consider options to mitigate future
negative consequences, and its repercussions would likely be felt potential supply chain disruptions. The goal is to regain control
for years if not decades. In addition to the countless lives that could over the end-to-end supply chain by reducing exposure to external
be lost, a conflict of this size and scope could have tremendous risks, which would otherwise not be present if the manufacturing
inflationary impacts worldwide, as costs would soar, and profit process wasn’t outsourced. This issue is not new, but only ~30% of
margins would be squeezed. The US is the world’s largest importer companies in the S&P 500 are discussing ‘offshoring’ in their
of goods, of which approximately one-fifth comes from China, and

Reshoring

The practice of transferring a business operation that was moved overseas
back to the country from which it was originally relocated.
PROS: CONS:

CONTROL OF SUPPLY CHAIN LACK OF SKILLED LABOUR
REDUCED LEAD TIMES LABOUR COST
(less distance traveled)
RESOURCE SCARCITY
FEWER IMPORT TARIFFS
INITIAL INVESTMENT REQUIRED
LOCAL JOB CREATION
HIGHER COST

Source: Raymond James Investment Strategy

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