Energy/Utilities
The IRA and IIJA are positive for the energy and utilities industries in the US. Although the level of impact varies by industry and subsector, both laws promote investment in clean energy facilities, emerging low-carbon technologies, and the collection and sequestration of carbon emissions generated from combusting fossil fuels. The laws also incentivize building energy infrastructure to support ongoing modernization and decarbonization efforts. Healthcare
The healthcare sector is unlikely to shift a material amount of manufacturing onto US soil, but changes to prescription drug pricing were proposed within the Inflation Reduction Act to raise revenue. The Congressional Budget Office estimates about USD 150 billion in price reductions over 10 years, but legal challenges are beginning to rise in opposition to the plan. In the near term, we do not believe this will have a material impact on earnings in the healthcare sector. Industrials/Materials
Overall, we view the IIJA, IRA, and CHIPS Act as boons to the industrial and material sectors, providing a tailwind to investment activity in the US for years that may offset some degree of broader economic softness. The very early stages of these initiatives, combined with the need to make supply chains shorter and more resilient in the wake of the pandemic, have already made manufacturing the fastest-growing category in nonresidential construction. Real estate
In the real estate sector, the ongoing diversification of global supply chains should benefit the industrial and warehousing sector. In addition, an increase in US manufacturing would likely support increased demand for industrial space. Further, warehousing, logistics, and distribution facilities should also benefit from a shift from “just in time” inventory to “just in case.” It remains to be seen how sticky these trends will be. Technology
Relentless innovation and cost optimization have driven outsize profit growth that has stretched the IT value chain across the globe. However, the quest for efficiency now faces the reality of operational and geopolitical risks. Overall, we think the global chip industry will have to adjust to lower profit margins and higher capital intensity as years of outsourcing and specialization are reversed.