Construction & Engineering

Highlights Portfolio Strategy The sustained global growth slowdown, widening junk spreads, along with the risk of a U.S. recession becoming a self-fulfilling prophecy suggest that caution is still warranted in the broad equity market on a 3-12 month time horizon. Weakening consumer sentiment…

Highlights China’s infrastructure investment growth rate could rebound moderately from its current nominal 3% pace, but will remain well below the double-digit rate it has registered for most of the past decade.  A lack of funding for local governments and their financing vehicles will…

The previous Insight showed that the industrial sector share price spike was in danger of a reversal. The S&P electrical equipment and components index looks equally vulnerable. Hefty short positions likely played a large role in powering the spike, and we are uncomfortable with paying a…

Highlights Portfolio Strategy The strong U.S. dollar is tightening global liquidity conditions, putting the post-election jump in stock prices at risk unless growth imminently accelerates. The spike in large cap industrial stocks represents a massive knee-jerk overreaction and we are adding…

Fed hawkishness reinforces the need for an imminent profit recovery to justify current valuations. Our Indicators do not signal such an outcome. Stay defensive, and return to an underweight stance in the industrials sector.

The S&P electrical equipment & components (EEC) group has comparatively less resource exposure than many other industrial sub-industries. The EEC index is comprised of mature, diversified manufacturing businesses with exposure across a broad range of end markets. This provides stability…

U.S. dollar softness may be sparking a subtle shift in sub-surface dynamics, to the benefit of select deep cyclical industries. Switch from rails into electrical equipment, and take profits in data processing.