Builders Hang in the Balance
The rust belt’s still not moving, but the rest of the United States is embracing old habits. The Washington Post reveals countrywide road traffic back at 90% of pre-corona highs. This traffic represents normal people going to work, to spend, to socialize. It’s grassroots intel on a fading fear factor.
This doesn’t mean we’re back to normal, though, as most other transport methods still lie abandoned, and there’s an undeniable correlation between where traffic is most jammed up (South Carolina and South Dakota) and where ‘ronas back on the rise. However, this still good news for investors in construction stocks like Caterpillar and REV Group.
Government contracts drive these companies’ profits, and the size of those contracts correlate with public construction spending. If you’ve got more commuters, wear-and-tear on public infrastructure increase the spending on public construction.
The excitement around construction spending was palpable during President Trump’s campaign, coinciding with a 200% upsurge in Caterpillar shares. The pandemic era anxieties around it were just alleviated with his touted $1 trillion infrastructure bill.
The president’s last infrastructure bill was for two-trillion but interrupted by his impeachment. It’s agreed that builders need putting to work on dilapidated roads and bridges, but who pays adds to the complexity of Congress passing this bill in a coronavirus-hit election year.
The Invstr community remains 95% bullish on Invesco’s Dynamic Building and Construction exchange-traded fund (ETF) and 93% bullish on Caterpillar specifically. It’s either a big bet on Trump’s reelection chances or a bet that infrastructure spending can be delayed no longer.