NEW YORK ( TheStreet) - Six downgrades to sell in the construction sector and five downgrades to sell in the industrial products sector question the sustainability of construction spending in an economy struggling to stay in growth mode.
The industrial companies downgraded this week provide copper wiring and lumber, and security, safety and climate control products.
The construction companies are involved in cement, home improvements, brass and copper products used in home construction, office buildings, factories, hotels and hospitals.
When so many companies supporting construction are downgraded almost simultaneously, this has to be a warning that Fed policy is not working. Perhaps these downgrades resulted from the rise in the yield of the 30-year bond, which is an important input to the both the ValuEngine valuation model and the ValuEngine forecasting model.The bottom line is that these downgrades suggest that construction spending should be weak in the quarters ahead. ValuEngine shows that the industrial products sector is 18.9% overvalued and that the construction sector is 15.6% overvalued.