Reshoring ETF Gets Boost From Trump Trade

As financial pundits fret over market valuations after a few years of watching a handful of stocks carry the broad market indexes, a case might be made for an actively managed strategy that is deliberately avoiding the high-flying Magnificent Seven stocks.

The Tema American Reshoring ETF (RSHO) was launched in May 2023 with a focus on an American manufacturing trend that has been strengthened by the reelection of Donald Trump and his promise of tariffs.

RSHO, managed by veteran portfolio manager Chris Semenuk, is designed to provide concentrated exposure to small- and mid-cap U.S. companies in the industrials, materials, manufacturing, and infrastructure sectors.

Reshoring Trend Boosted by Trump Election

“The tailwinds behind reshoring and onshoring are strong and it’s still early,” said Maurits Pot, founder and chief executive officer of New York-based Tema ETFs, which entered the ETF business 18 months ago and has seven ETFs that combine for $318 million.

About half of those assets are in RSHO, which has gained 27% this year, while the SPDR S&P 500 ETF Trust (SPY) has gained 28.4%. But since inception, RSHO has gained 62%, compared to a 40% gain by SPY over the same period.

To be clear, it is no small feat in this market to outperform an index riding the Mag Seven wave without investing directly in technology sector stocks or the Mag Seven.

Pot said the secret is both a focus on small- and mid-cap companies and looking beyond traditional infrastructure stocks for onshoring exposure.

“The focus needs to be on supply chain security, not just supply chain costs, because we know the supply chains are increasingly unreliable and the cost advantages of going offshore are narrowing,” he said. “The opportunities are in the small- and mid-cap industrials and materials.”

Infrastructure companies, as the classic onshoring play, are a part of it, but shouldn’t be the foundation of an onshoring strategy that seeks to benefit from Trump’s commitment to American manufacturing growth.

“Infrastructure is an enabler of reshoring, but is not core to reshoring, and it’s a lagging indicator,” Pot said. “The beneficiaries of Trump’s trade policies will extend well beyond infrastructure.”

RSHO has an expense ratio of 75 basis points and is a concentrated portfolio of between 35 and 45 stocks.

The top two holdings are Milwaukee-based Rockwell Automation and Cleveland-based Applied Industrial Technologies.

“It’s clear that Trump wants to keep production, ideas, money and investment closer to home, and he’s doing it through tariffs and incentives,” Pot said. “This industrial revolution will take a decade-plus, and we’re only in year two or three.”