The latest Rasmussen general presidential election poll out on September 8 has Hillary Clinton leading Donald Trump by just 4% with the first debate between the two candidates only a few weeks away.
In the meantime, traders will continue to watch the polls and piece together what to expect on Election Day.
There’s plenty of uncertainty to go around these days when it comes to Washington. However, according to the candidates’ economic plans, one thing seems certain no matter which candidate wins: infrastructure spending.
In recent weeks, Clinton has discussed her plan to add $250 billion in additional infrastructure spending to the $305 billion five-year plan enacted in last year’s transportation spending bill. The plan also includes the creation of a federal infrastructure “bank” authorized to lend $225 billion for infrastructure projects on a revolving credit plan.
Trump has been discussing a massive five-year, $1 trillion infrastructure investment plan that would roughly double the infrastructure spending of Clinton’s plan. Trump says he will pay his plan’s staggering bill by creating an infrastructure project fund supported by government bond sales.
Regardless of which candidate wins in November, someone plans to spend between $500 billion and $1 trillion on infrastructure projects within the next five years.
Which companies will benefit from all of this new government infrastructure spending? It’s likely the entire infrastructure industry will benefit, but certain companies are focused in areas that the government may specifically target.
Eagle Materials, Inc. (NYSE: EXP) makes a range of materials used in different types of construction, including cement, slag, concrete and recycled paperboard. The company also supplies building materials for the oil & gas industry, which is positioned for a long-term recovery in the next several years.
Jacobs Engineering Group Inc (NYSE: JEC) provides construction services for a wide range of projects, but the government might be particularly interested in its bridge-building expertise.
Martin Marietta Materials, Inc. (NYSE: MLM) is one of the largest crushed stone, sand and gravel suppliers in the world.
Vulcan Materials Company (NYSE: VMC) is also a leader in crushed stone, sand and gravel, as well as asphalt mix.
And of course, if you can’t decide which infrastructure stocks you like best, you can always opt for the iShares S&P Global Infrastructure Index (NASDAQ: IGF).
This is where it gets a bit tricky. The possibility of a multi-year surge in government infrastructure spending as well as a long-term recovery in oil & gas construction paints a rosy picture for these infrastructure stocks. Unfortunately, the candidates’ spending plans are far from secret.
So far in 2016, the IGF has more than doubled the return of the S&P 500, surging 17.7%. Each of the individual stocks mentioned above is also up between 17% and 32% so far this year. In other words, much of the meat on the bones of the infrastructure spending trade may already be gone.
Still, despite the large run-ups this year, Martin Marietta, Jacobs Engineering and Eagle Materials all trade at reasonable forward PE ratios of under 19.
The downside in these stocks is likely limited by Hillary Clinton’s $500 billion spending plan. However, if Trump’s poll numbers begin to creep higher heading into November and it looks like $1 trillion is in play, the infrastructure trade may still have significant room to the upside.
Disclosure: the author holds no position in the stocks mentioned.
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