New inflation and growth data are prompting a rethink of what’s next for the U.S. economy. But if you follow the money — at least when it comes to where multinational companies want to invest – you’ll find signs of dogged optimism. That’s MM’s big takeaway after interviewing Stefan Simon, Deutsche Bank’s chief administrative officer and head of the Americas. We discussed how the German lender’s clients in Europe and Asia are increasingly eager to redirect investments to the U.S., regardless of whether Joe Biden or Donald Trump is the next president. “They’re very clear that the growth market for the coming years – let’s say until the end of this decade — is the U.S.,” he said. What’s driving the momentum? Deutsche Bank sees a “competitive structural advantage” for the U.S. economy, according to Simon. He said the factors sharpening America’s edge include a young and dynamic workforce, energy security and low energy prices, a strong environment for technological developments and the power of the dollar. The banks developed the view based in part on anecdotal evidence from its large and mid-sized clients. The U.S. has always been an important market for European companies in particular. European direct investment here hit nearly $3.4 trillion in 2022. “This structural competitiveness is accelerating,” Simon said. Recent U.S. government support for industry — including the bipartisan infrastructure law, the CHIPS and Science Act and the Inflation Reduction Act — are feeding views about American dynamism but don’t appear to be primary drivers for Deutsche Bank’s European clients. “There are a number of polls that were done on German and European companies’ direct investment in the U.S.,” Simon said. “Depending where you look, CHIPS Act and IRA ranked between No. 5 and No. 8 on the arguments to invest in the U.S. That was an interesting observation for me.” What it means for companies and Deutsche Bank itself The bank is seeing the trend across a range of sectors, including industrial, health care, chemicals, pharmaceuticals, automotive and automotive suppliers, and even real estate. Companies aren’t necessarily shifting their current industrial capabilities from Europe into the U.S. but are redirecting new activity, according to Simon. “I just had a very recent example of a nice European Mittelstand [a small- or medium-sized firm] who said, for us, currently the U.S. is about 20 percent of revenue and profit, and we are very clear that within two to three years it’s going to be more like 45 to 50 percent, and that is where we put our investment,” he said. In response, Deutsche Bank is working to bolster its product offerings, personnel and technology to strengthen “pipes” for clients between Europe, Asia and North America. The idea is to improve support for companies between their headquarters and their expanding U.S. operations. Simon said the bank is “allocating a lot of our investment spend for the coming years” across the company's U.S. operations. Deutsche Bank’s U.S. arm represents about 20 percent of the lender’s performance. Risks and the U.S. election The potential areas of concern among Deutsche Bank’s clients are tied to geopolitics, according to Simon. They relate to the Ukraine war and the level of U.S. support, Middle East conflicts and the U.S.-China relationship. Companies are dealing with a high level of uncertainty around the U.S. political landscape. But Simon said election-related dynamics “don’t seem to have an impact on clients’ view on the economy in the U.S.” “We have not heard that people are saying, let’s hold back direct investments, let’s wait, who’s going to win the election,” he said. “Our clients are very convinced about the economic and competitive advantage of the U.S. and the prospect for U.S. developments.”
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