Summary

• U.S. economy shows surprising resilience with 3.3% GDP growth.
• Strong consumer spending and business investment fuel domestic momentum.
• Cyclical sectors like banking and industrials may see significant growth.
• Focus on companies with strong domestic exposure for potential gains.

The Stubbornly Resilient American Economy

Just when we were all bracing for the inevitable economic hangover, America decides to throw another party. I must admit, I was among the sceptics. For months, the narrative has been one of impending doom, of interest rates finally biting and consumers finally retreating. Yet, the latest figures suggest the U.S. economy isn't just limping along, it's practically jogging. A GDP growth revision to 3.3 percent isn't just a rounding error, it’s a clear signal that something interesting is afoot.

When Boring Statistics Tell a Good Story

Let’s be honest, economic revisions are usually the stuff of dusty textbooks, not thrilling investment theses. But this one is different. It points to a deep-seated strength that many of us, myself included, may have underestimated. The engine room of this resilience is the American consumer, who continues to spend, and the American business, which continues to invest. This isn't a fleeting sugar rush from government handouts. It feels more fundamental, a reflection of genuine confidence.

To me, this creates a rather compelling picture. While everyone is fretting about global supply chains and geopolitical spats, a powerful domestic story is unfolding. Companies whose fortunes are tied directly to the health of Main Street, not the whims of international markets, suddenly look quite appealing. They are insulated, in a way, from the chaos happening elsewhere.

Finding Opportunity on Your Doorstep

Take a classic regional bank like U.S. Bancorp. Its success isn't dependent on complex derivatives or volatile emerging markets. It thrives when local businesses are borrowing to expand and families feel secure enough to take out mortgages. It’s a straightforward, almost old-fashioned, business model that benefits directly when the domestic economy is humming along. In an environment of rising rates, a strong economy allows such banks to improve their margins, turning a headwind for some into a tailwind for them.

But this resilience isn't just about finance. Look at a company like Ritchie Bros Auctioneers. It’s the world’s largest marketplace for heavy industrial equipment. When the U.S. economy grows, construction sites buzz with activity and infrastructure projects get the green light. All that activity means machinery is constantly being bought and sold, and Ritchie Bros is there to take a slice of every transaction. It’s a brilliant barometer for the real, physical economy.

From Diggers to Dinner Tables

This trend even extends to the things we buy at the supermarket. A company like Reynolds Consumer Products, the maker of Hefty bags and Reynolds Wrap, might seem like a defensive, even dull, investment. However, when people feel good about their jobs and their finances, they are more likely to reach for trusted brands rather than cheaper alternatives. This quiet confidence, reflected in millions of shopping trolleys, provides a solid foundation for growth.

These companies, from banking to bin bags, are all part of a broader theme. They are cyclicals, meaning their fortunes rise and fall with the economic tide. But they are specifically tied to the American tide. For investors looking to tap into this surprising strength, a collection of such companies can offer a focused approach. You can explore this idea further in the U.S. Market Resilience Explained | Growth Sectors basket, which groups together businesses poised to benefit from this very trend.

Of course, nothing in investing is a sure thing. Cyclical stocks are a double-edged sword. They can offer handsome returns when the economy is firing on all cylinders, but they are also the first to suffer when the music stops. This isn't a risk-free punt. It’s a calculated position based on the idea that the U.S. economy has more fight left in it than many believe. And right now, the evidence seems to be on its side.

Deep Dive

Market & Opportunity

• U.S. GDP growth was revised upward to 3.3% for the second quarter, driven by consumer spending and business investment.
• Consumer spending constitutes roughly 70% of American economic activity.
• The opportunity focuses on companies with cyclical exposure to U.S. domestic economic growth drivers.

Key Companies

• U.S. Bancorp (USB): A large U.S. regional bank whose performance is tied to local economic health, business investment, and consumer borrowing. It benefits from increased lending activity and has a history of maintaining dividends.
• Ritchie Bros Auctioneers Inc (RBA): Operates the world's largest industrial auction marketplace, earning commissions from equipment transactions. Its business is dependent on U.S. industrial, construction, and infrastructure activity.
• Reynolds Consumer Products Inc (REYN): A consumer goods company with brands like Hefty and Reynolds Wrap. It benefits from strong consumer confidence, which can lead to increased spending on branded household products.

Primary Risk Factors

• Cyclical stocks can be volatile, and their performance depends heavily on continued economic strength.
• These companies are more vulnerable during economic downturns.
• Economic conditions can change rapidly due to interest rate policies, geopolitical events, or unexpected economic shocks.
• All investments carry risk and you may lose money.

Growth Catalysts

• Sustained household confidence and corporate willingness to invest in growth can boost domestic demand.
• Companies with a strong domestic focus benefit directly from U.S. economic vitality without the complexities of international markets.
• During periods of economic strength, the earnings of cyclical companies often grow faster than the overall market.
• Increased construction and infrastructure spending creates more business for industrial sector companies.

Investment Accessibility

• This investment theme is accessible via fractional shares, with opportunities to invest starting from $1.
• It is available on the Nemo platform, which is regulated by the ADGM and offers commission-free investing.