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The Waiting is the Hardest Part

Investors like good news. They like to buy stocks with good news, and they like those stocks to rise immediately. For a while, this was true for construction and infrastructure stocks. The price increases of these stocks, affectionately known as “The Trump Bump” may be getting long in the tooth as investors lose their patience waiting for the promised funding to come through.

As the market digests the bitter news that any boost to government-funded infrastructure spending has been delayed, I expect the group to behave more rationally. For Profit Catalyst Alert subscribers, that means put positions for those stocks buoyed by wishful thinking and long positions for those on solid footing.

Shares of companies that benefit from higher infrastructure spending soared in late 2016 when newly elected President Trump promised $1 trillion in funding for new projects. You can feel President Trump’s enthusiasm from this pitch to a joint session of Congress in mid-February:

“Crumbling infrastructure will be replaced with new roads, bridges, tunnels, airports and railways gleaming across our beautiful land,” Trump said of the initiative.

“To launch our national rebuilding, I will be asking the Congress to approve legislation that produces a $1 trillion investment in the infrastructure of the United States — financed through both public and private capital — creating millions of new jobs.”

This all seemed like the news investors had hoped for until the president’s budget was released last week. The proposed budget contained nary a mention of increased infrastructure spending.

Mike Mulvaney, the president’s budget director, told reporters that the administration’s priorities are as follows: health care, tax policy and then infrastructure. While it’s good news that infrastructure is included in that list, wading through the quagmire of health care and fiscal policy is likely to take up quite a bit of time and funding.

It seems that the president is taking some cues from Wilbur Ross, newly confirmed secretary of commerce, and Peter Navarro, an economics professor at the University of California who heads a trade council for the president.

Both of these experts support a plan that promotes the funding of private infrastructure projects via tax credits. House Speaker Paul Ryan has pointed to the same strategy which looks for the financing from private corporations. Recently he noted that as little as $25 billion in government infrastructure spending would hopefully be matched by $975 million from the private sector.

Wishing and waiting are poor investment strategies. I’d rather focus on the infrastructure stocks that have funding locked and loaded from bills passed by our former president.

In the first month of President Obama’s 2009 term, he signed an $800 billion stimulus bill that included over $100 billion for infrastructure spending. Eight years later much of those spending plans have been set in motion, and many companies are reaping enormous profits here and now from those federal dollars.

 


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Stock Talk

Scott Dunham

Scott Dunham

This may come as a shock, but Mr. Trump says a lot of things that aren’t true. You might want to short some infrastructure funds.

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