A Push to Rebuild Means a Push for Steel
The moment of truth is here… Can Donald Trump live up to the policy plans that he has wholeheartedly promised to his voters?
Trump promised that one of his first goals while in office would be fixing America’s deteriorating infrastructure — an excellent plan, in my opinion. America’s roads and bridges have been long overdue for an upgrade.
Regardless of who actually ended up moving into the White House on January 20, 2017 — Hillary Clinton or Trump — both had plans to rebuild America’s infrastructure, and they both iterated those plans throughout their very long fight to the presidency.
Earlier this year in an interview with Fox Business, Trump was bold to say, “Nobody can build better than I can. Nobody knows construction better.” And, well, we have the next four years to see if that’s true.
With most of Trump’s policies throughout his campaign, details have been extremely vague. However, now that he’s the president-elect, we can expect more fleshed out details towards policies — of course, if they actually come into play.
A Plan to Rebuild
A plan has been drafted by economic advisors Peter Navarro and Wilbur Ross, and right now that plan will finance spending $1 trillion over the next decade on the country’s infrastructure.
The plan mostly depends on private funding along with the government encouraging investment through tax credit, which would raise a return to investors in order to lower the cost of borrowing to states and municipalities, who would be the ones overseeing the projects.
According to the American Society of Civil Engineers, the nation’s infrastructure needs $3.6 trillion worth of work by 2020, and currently the federal government only spends about $100 billion a year, with states and cities spending another $320 billion or so.
The Push to Rebuild is a Push for Steel
The Trump rally for infrastructure spending and trade protection will without a doubt push for growth in the steel industry, a push that has been long overdue…
The plan to build up infrastructure throughout the country means a significant increase in demand and spending for steel. After all, a prime component of constructing new bridges and roads is steel.
When Trump’s future presidency was officially announced, steel companies right away saw a surge in their stock prices — a surge that hasn’t been seen in almost a decade.
Analyst Evan Kurtz has said:
We believe Trump plans for infrastructure spending and trade protection, as two of the most digestible of his proposals, could be early in the queue… These policies should benefit the U.S. steel industry by both adding to demand and curbing import supply.
After U.S. Steel Corp. (NYSE: X) experienced 30% gains in just a few days, investment banker Morgan Stanley announced an upgrade to AK Steel Holding Corporation (NYSE: AKS). Right now, Morgan Stanley is very bullish when it comes to this sector… and for good reason.
The rally for steel companies has continued into this week. On Monday, stocks continued to soar.
Take a look at U.S. Steel Corp. right before the election. It was priced at $20.63 on November 7th, and on November 8th, it increased just a little to $20.96. But November 9th is where it really started to grow, closing the day out at $24.56.
To further iterate the type of gains steel companies have been experiencing in just one week after Trump was elected, check out how U.S. Steel’s stock was doing a month ago. It was priced at $17.68 on October 7th, and yesterday, November 15th, it was at $28.44 — a 60.8% increase.
AK Steel Holding Corporation experienced the same surge as U.S. Steel Corp did. The day of the election, it closed the day at $5.88, and a week later it closed out at $8.28 — a 40.8% increase in just one week.
Policies that’ll increase spending on infrastructure need to happen. Frankly, it’s been a long overdue policy that hasn’t been able to catch any light, but right now would be the perfect opportunity for it — especially with Trump’s presidency. People are ready for change and will be more accepting of these changes, mostly because they’d be coming from a new president.
Until next time,
Jennifer Clark
Pro Trader Today