The next economy? We have already run through a number of differing economies as well as economic possibilities. We've had the virus economy, the "stay at home" economy, the "work from home" economy, which is not the same thing. We have also tried to play our cards right, or at least protect the hands we hold by setting up the "rebound" economy, or simply just holding higher levels of cash as high dividend paying stocks suddenly became less reliable. Now, investors must prepare a new slice of their portfolios that they might have had ready to go in the wake of the 2020 national election, and then had to re-allocate those resources as time wore on, and as that idea (good at the time, better now) simply faded. Where are we going with this? Infrastructure. The build-out. Surely there will now be bipartisan support for such spending. The arguments will be over the size, and then maybe even the focus, but the willingness to extend deep deficit spending? No longer an issue. Not now.
What We Know
We know that House Democrats had already put together a $500 billion, five year infrastructure build-out proposal. We also know that President Trump has long wanted to get an infrastructure rebuild together, really since before he was ever elected. Now, with an economy hampered by the negative impact of a global pandemic that forced a series of government mandated economic shutdowns, and as regional leaders try to roll back that shutdown, there is but one obvious "go to" after the monetary pipes are all laid.
That "go to" would be not a fiscal support package, but a fiscal stimulus package. Stimulus does not just bridge gaps in cash flow through the use of increased debt-load, but actually uses the spent money to provoke a multiplier effect. This means job creation. What to do, when the private economy needs to be convinced to invest? Spend public funds on building, on repairing, and if possible on innovation. Job creation. Multiplier effect. Bingo.
So, one thinking about investing in such an idea, once the dust settles because I really don't think one (or at least this one) wants to chase lusty headlines well ahead of such proposals taking the form of action. It is likely that there will be no next fiscal package out until later this summer. Between now and then, my guess would be that either through data or the spoken words of leadership, there will still be some down days ahead, and perhaps with them, better opportunities for either entries or adds.
Investors are fairly sure where Washington wants to go with this. Modernizing transportation would be imperative. That means modernizing airports, maybe modernizing the rails. repairing aging bridges, or building new ones. Repairing or widening roads, particularly in congested areas. After transportation, comes communications. This means the build-out of 5G technology with a sense of urgency, especially as it is understood that the Chinese are ahead of us in this space. Beyond that, there are still plenty of locales in these continental United States where broadband is unreliable, or cell service is non-existent. At this point, that is really unacceptable.
If they are going to build, then they are going to hire. The equipment that this renewed public demand for labor will operate will be manufactured and sold by Caterpillar (CAT) and Deere (DE) . That equipment will be leased by a firm like United Rentals (URI) . In fact, of all the names mentioned in this piece, that one may be for me the most obvious dip purchase next time I see that fat pitch. What are they going to do with these large vehicles? They are going to move earth, and they are going to move materials. This brings in some old, but not forgotten past favorites such as Martin Marietta (MLM) , Vulcan Materials (VMC) , and US Concrete (USCR) . Throw in a Weyerhaeuser (WY) while you are at it. They'll need lumber too. Then, as always there will be a need for carting services. In short, garbage removal. Waste Management (WM) , that one will be a must.
Let's move on past the kind of construction that would have made President Eisenhower proud. Let's talk about cell towers and expanding the wonders of the internet, as well as the still unknown that is 5G technology. Now, we need American Tower (AMT) , we need not not just telecom providers like Verizon (VZ) and AT&T (T) , but we're going to need the firms that can provide these firms with the guts of the whole operation. We need Marvell Technology (MRVL) and Analog Devices (ADI) .
It has not been mentioned broadly, but what about the Utilities, or more specifically, water based utilities providing such necessities as purification and/or desalination. Suddenly American Water Works (AWK) , and the much smaller, but I will mention it because it is in the "Stocks Under $10 '' portfolio... Energy Recovery (ERII) just became more interesting.
The Path Chosen
My thoughts? At this point, with positive news regarding the treatment of Covid-19 supporting early trade on a day that was already set to lift off, I think it becomes clear. If one is now over-exposed to cash, or the work from home trade, or the pantry, the time has come to carve or "re-carve" a slice of the portfolio under the headline "Infrastructure." Sure the names will be industrial, and reliant upon the economic growth that they themselves will be trying to provoke. That said, we're not talking about aggression, we are talking about a finessed, intelligent approach to what we see happening in real time.