Trump Calls Himself The 'Builder President.' The Stocks That Build America Are Holding Their Breath.

As Donald Trump prepares to assume the presidency for a second term, the markets are abuzz with anticipation and uncertainty. Trump, who has dubbed himself the "builder president," has promised to strengthen domestic manufacturing chains and modernize public infrastructure. But what does this mean for the stocks that build America? Let's take a closer look.



During Trump's first term, construction and engineering stocks performed exceptionally well. Heavy engineering and construction stocks such as Quanta Services (PWR), Fluor Construction (FLR), and Argan (AGX) experienced significant gains. Quanta Services rallied 53% in the past year and has more than quadrupled over the past four years, while Fluor Construction has nearly tripled since 2021, and Argan more than tripled in the past year alone. These gains can be attributed to several factors, including the reshoring of manufacturing, the strengthening of domestic manufacturing chains, and the modernization of public infrastructure. The vast build-out of data centers has also driven demand for power generation facilities, further boosting the performance of construction and engineering stocks.

However, there is also uncertainty and unease in the construction industry. Construction spending has stalled, U.S. supply chains face challenges, and interest rates remain high. Much of the anticipated public infrastructure spending has not yet turned into construction awards or shovel-ready projects, and growth areas in the private sector are slowing or shrinking.

As Trump prepares for his second term, investors are mixed in their anticipation of his policies. Trump has threatened to rescind all unspent funds under the Inflation Reduction Act (IRA), which could impact the construction industry. However, senior construction industry executives believe the risk of an IRA rollback is low, given the bipartisan nature of the IRA and the infrastructure dollars and jobs flowing into red or purple states.

Trump's trade policies and tariffs could also have significant impacts on the supply chain and costs for construction and engineering companies. Increased costs, supply chain disruptions, reduced competition, and potential job losses are all potential consequences of Trump's trade policies and tariffs. Construction and engineering companies may face higher input costs, supply chain disruptions, and reduced competition, leading to higher project costs and potentially making projects less profitable or even unfeasible.

Despite these challenges, construction and engineering stocks have performed well under Trump's first term, and investors can expect continued growth in the sector during his second term. The reshoring of manufacturing, the strengthening of domestic manufacturing chains, and the modernization of public infrastructure are all trends that could drive growth in the construction and engineering sector. However, investors should be prepared for potential policy changes and market volatility.

In conclusion, Trump's return to the White House could bring back some familiar market dynamics, but the economic and geopolitical landscape in 2024 is notably different from 2016. Investors should be prepared for a mix of potential tailwinds and headwinds that may shape sector performance in unique ways. Trump's expected emphasis on tax cuts and deregulation could support corporate valuation multiples, but investors should also be aware of the potential risks and uncertainties associated with his trade policies and tariffs. As always, it's essential to conduct thorough research and stay informed about the latest developments in the market to make well-informed investment decisions.