Cconstruction and engineering company stocks like Aecom (ACM) , Jacobs Engineering Group (JEC) and Fluor (FLR) have made big gains since Donald Trump's upset win in last Tuesday's election in anticipation of his proposed massive infrastructure investment. As of Thursday's close those shares added 37%, 20.4% and 13.3% respectively since the Nov. 8 election.
Anticipation for infrastructure is at a fever pitch, but political and economic realities are applying the brakes to the Trump Train. It's no coincidence that the aforementioned construction stocks are all either down or virtually flat Friday. The machinery companies are also facing similar resistance.
Deutsche Bank analyst Chad Dillard made the case to clients in a research note Friday morning that the sector's rally in response to Trump's victory and his decade-long, $1 trillion infrastructure initiative has gone too far - and too fast.
The Trump plan revealed in an October policy memo from his campaign calls for that $1 trillion investment to be raised entirely through public-private partnerships (P3s). To acquire the estimated $167 billion in equity needed (the rest would be debt), the Federal government would need to offer an 82% tax credit to the private investors, according to the memo.
There's a few problems with that plan, as Dillard explained in a phone interview.