Hillary Clinton and Donald Trump disagree on most things. There is, however, one issue on which they seem to be in agreement, and Wall Street investors are starting to catch on.
In Christopher Wood’s weekly “Greed and Fear” newsletter, the CLSA analyst pointed out that both candidates had expressed support for increased infrastructure spending. This is good news for manufacturing and heavy industries.
“GREED & fear still maintains the view that the chances of a substantial infrastructure stimulus are rising significantly whichever side wins the White House in November,” the note from Wood said.
Trump has supported rebuilding infrastructure from the beginning of his campaign.
“Rebuild the country’s infrastructure — nobody can do that like me, believe me,” he said in the speech announcing his candidacy.
“It will be done on time, on budget, way below costs, way below what anyone ever thought. I look at these roads being built all over the country and I say, ‘I could build these things for one third.’ We have to rebuild our infrastructure: our bridges, our roadways, our airports.”
Clinton said she would increase federal spending on infrastructure projects by $275 billion in the five years after her possible inauguration.
A win by either candidate would therefore appear to be good news for construction companies, equipment manufacturers, and materials firms. This development has not been lost on Wall Street, Wood said. Here’s his breakdown (emphasis added):
Indeed in recognition of this theme, which judging by meetings over the past week and more is clearly gaining traction with US based investors, GREED & fear shows how a ‘smokestack’ portfolio of five US stocks geared to this area has performed. The stocks appear to have started performing after years of trailing the S&P 500. Thus, the portfolio has risen by 22% so far in 2016 and is up 43% from its January low. By contrast, the S&P 500 has risen by only 2.3% year-to-date and is up 14% from its February low.
The five stocks tracked are Vulcan Materials, Astec Industries, Martin Marietta Materials, AECOM, and Fluor.
To be fair, any proposal that the eventual president makes will have to be approved by Congress. Given that body’s mindfulness over the budget and division between the two parties, it is unclear whether that could happen.
Wall Street, however, is willing to make the bet for now that there could be a bump in spending and a boon for building companies.
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