"Made in USA" hot market theme in 2025?

Rather quiet throning of the new US administration in Q1 from markets perspective has led to a complete turn in late Q1/early Q2 with a major hit of trade war policies. Risk-OFF environment in early April has sent markets tumbling with quite a pessimistic outlook, with the potential for a more of turbulence this year due to consequences on inflation side.

But the focus of this article is not about the turmoil. It is about the "opportunity side for trading", where could we get momentum ignition still, regardless of how poor the economic outlook might be for 2025.

One might think that risk-off surely cannot create a bullish hot theme in the market right? Well, it can. A frequent example i like to bring up is back in 2022 on the ignition of the Ukraine war and risk-off market guided by an inflation uptick, the oil sector started to heat up. This has led to many small-cap opportunities along with large-cap opportunities in the energy sector.

Trade war, if leads to a restructuring of supply chains by administration-guided action, could also lead to some sort of hot momentum themes that relate specifically to "NOT MADE IN CHINA BUT MADE IN USA FROM NOW ON".

We are talking about PRs and news releases of established smallcap, or midcap companies that get investment influxes (or are willing to spend themselves via financing/diluting) to create local manufacturing facilities within the US. Whether we believe they will follow through with projects doesn't matter, from a trading perspective at least, since this is by no means an investment-focused article. If it creates momentum, that's good enough.

Two biggest national security issue sectors (as per administrations label):

-Rare earth materials and pharmaceuticals

Rare earth minerals

Rare earth minerals along with semiconductors are quite a unique resources/products because they are such a necessary yet tiny part of modern technological product.

Those minerals arent largely available to source in many countries globally, they are a tiny representation of total final product weight, yet a huge importance to actually have product finished. Meaning without those minerals, if trade war was to escalate leading to China banning those exports completely, it could hurt US supply chains significantly, because of how many end-result products require those.

Therefore...those minerals essential for many electronics or advanced tech products.

This makes it one of the main "rush" sectors for the US administration to start looking for the relocation of supply chains away from China, in the middle of a trade war. Since there aren't that many US-based companies with mining presence locally on US soil, it makes those few companies listed on Nasdaq well positioned for an upside and "made in the USA" hot theme. I believe we are already witnessing the start of it right now.

The question is, how many other smallcap tickers in the (other) mining sectors will "jump the ship" into rare earths, striking investment deals to open new mines and getting a piece of the pie on this action? Or just doing PRs for that without any intent (which is equal for momentum creation). This is where the momentum creation could be.

On side note MP materials is the leading sector ticker and its trend should be used as calibration of flows for rare earth materials for other smallcap tickers. Typically in any "made in USA" sector theme, there should be one high liquid midcap or large cap company as established runner (strong uptrend) before we would look for those kind of opportunities to trade or momentum ignition broadly in smallcaps. This helps with chances. First validate hot midcap or largecap stock in such sector, and then look for smallcaps.

Pharmaceuticals

No, the worry isn't about cutting off the fentanyl supply as primary issue due to trade war, it is every other drug aka medicine that actually is as well produced and exported from China, which matters and impacts health of many individuals if costs were to skyrocket due to tariffs.

China produces for the US about 20% of total pharmacy products/exports, and while that doesn't seem like a high number, let's keep in mind if a trade war were to escalate and the Chinese economy faced large damage because of it, it wouldn't be impossible to imagine for China trying to hit the US where it hurts the most to create political pressure trying to invert the trade war. A strategic move, low angle hit, but a stategic move non the less. This is where pharmacy exports might come into play for equity markets.

But if I know anything about the US, and I do know some, it's that the US will not wait for China to hit first, instead it will initiate the breakup itself, by imposing the tariffs on pharmacy products first before China creates any sorts of restrictions, so that it forces US companies to restructure supply chains before China has ability to play on that card later into the trade war.

But enough with the backstory, let's go into practicals:

Do you remember back near the end of the prior Trumps administration the KODK had hot run (and political fiasco afterwards) when the US administration came up with a plan to relocate most of China-based pharmacy supply chains into the US over the next upcoming years?

Well...in my view they used KODK as a laboratory mouse, an experiment to see how easily it would be to influx into midcap companies some political capital and just "remake" the existing midcap nonpharmacy companies into pharmacy-producing companies (for the sake of speed). Because for large-scale pharmacy production, you kinda need a blueprint that scales from midway up, not from low ground up.

Well KODK "project" didn't end up too well, but I think that we might see more of that regardless.

Tons of material has been issued in prior administration about how pharmacy dependence of the US towards China is the number one national security issue.

I am by no means promoting that view, just pointing out that it matters from markets perspective, since that same administration largely is back in the seat again this time.

Could we see more of those "made in USA" pharmacy "jump the ship" investment deals made for different companies/stocks in 2025? I would think so. As you can see US has kept pharmacy products to be tariffed the last, because of how sensitive the issue could be for US consumers. And especially if China hits back with a response, it could get ugly fast. But those tariffs are coming:

I think that pharmacy could be one of those biggest hot themes for "made in the USA" in equity markets upcoming, because of:

-how many pharmacy/biotech US-listed smallcap stocks there are (tons of small caps)

-is high priority speed issue to restructure those supply chains once costs start to go up since the health of people is at stake, which increases chances for investments or "bids" to show up on any stocks that PR with those news

To keep summary short: I think we might get more KODKs in 2025, due to "made in USA" potential theme in play.

Manufacturing this and that, but this time in US (well some of it)

High tariffs will force some US companies to relocate production, onshoring into US as the costs will start to make more sense.

Additionally, it will give entrepreneurs within the US reasons to establish new manufacturing facilities as tariffs will create more opportunities to avoid outsourcing and provide US based manufacturing.

But...from a trading perspective, this does not matter much, because we are looking for already established companies to "jump the ship" as key catalyst play. We arent looking for non-existing yet to be formed companies, but those already formed that trade on Nasdaq so that there is a trading opportunity in first place.

An (theoretical) example for above would be: A smallcap company in the Bitcoin space abandons crypto mining to create a new manufacturing facility for pharmacy products needed within the US. An example of "jumping ships" approach for smallcap company. This is by the way common behavior in small-caps within hot sector plays. Typically it's just for companies to make some side gains, run dilution, and end up with unfinished projects in the end. But from a trading perspective, we don't care. It's about volatility and momentum creation.

Or another example would be: Company in coal sector, transitions its operations from coal into rare earths mining, by opening new mine in US. And many more other examples. Its either 1."jumping the ship" PR, which means company is self financing. Or its 2. private / political investment to jumpstart larger scale project. Those two are most likely PR types under the potential of "made in USA" theme in my view.

Example for news catalysts and intraday trades for rare earth materials play from April:

PR for AREC:

AREC long opportunity on rotation from the consolidated range:

USAR strategic positioning as one of few mid cap miners with US local mines:

USAR long opportunities intraday on two accumulations:

Again, the idea is not to overstay any of those trades for massive swings, or investments. Its purely to trade momentum on long side for few R trades, and then short parabolics if they get there. And perhaps one or two swings in afterhours on very high volume smallcaps, that have strong EOD market close. Thats it.

But news in small-caps or mid-caps doesn't matter? Right?

Well yes, for the most part, news PRs don't matter. But there is that but...

Sometimes there is a macro theme that ignites, a global large-scale catalyst such as a trade war, that creates a rush for capital to seek the companies willing to offer solutions.

And typically, those aren't going to be large-cap companies, instead it will be small caps that jump into the risk area opportunities first. This means in some instances when large-scale catalysts are present they can ignite small-caps to go beyond expected (covid mask theme as an example related to the big macro catalyst pandemic, as a similar example to the trade war).

So "Made in the USA" is right now, in this environment of trade restructuring one of those where the news could play a factor in momentum creation, if certain companies/stock do PR with such news or get direct investments ahead from administration itself (as we have seen with KODK before).

Conclusion

I have given up two example sectors of rare earth minerals mining and pharmacy as the example above, but don't think that it stays just here with those two sectors.

The tariffs will hit across the board everything that relates to trade, since there is a huge political will to relocate supply chains from China entirely.

We could see many more sectors that get in play, those two above are just the most obvious ones already somewhat in active state.

Keep your eyes open, and make sure to not underestimate on the short side how far those "made in USA" stocks can go if we establish this as really solid theme, under the right market conditions (if broad markets are melting in risk-OFF obviously the momentum wont have much chances).

Even if the news is total fluff and company has 0 capacity of actually following through with the project, those kind of PRs might play a role in creating momentum in small and midcap stocks. Often times when there is a "rush to make product or resource, due to large macro catalyst presence", the market makers will inflate those tickers beyond the scale for multiple different reasons. And then of course deflate them completely. So play the timing well.