Infrastructure Stocks Tumble On Report Trump May Delay Infrastructure Bill Until 2018

Construction, engineering and materials stocks are underperforming the market on sudden concerns that in addition to tax reform and Obamacare repeal, another core aspect of Trump's fiscal stimulus, Infrastructure spending, may be delayed by at least two years.

As Height Securities wrote in a note "Time for Plan B?" this morning, while no decisions have been made, Axios reports that the Trump is considering pushing off its call for Congress to pass an infrastructure bill until 2018, given the full slate of other top-tier items on Congress’s plate this year including healthcare and tax reform, Supreme Court fight, and potential debt ceiling / government shutdown battles.

The idea would be to take up infrastructure in an election year and make it very difficult to oppose money for home-state roads, bridges and other projects that lawmakers can take credit for. It also would make sense procedurally given we expect the money to pay for infrastructure will largely come through tax reform and deemed repatriation of overseas earnings with a one-time tax.

Again the legislative strategy is still evolving and such a timeline would run counter to what GOP leaders laid out last month in their Philadelphia retreat, but the calendar is beginning to look crowded and infrastructure has always been less of a priority for Republican leaders on Capitol Hill than it has been for Trump.

Next Tuesday’s speech to Congress by Trump will hopefully address the issue and provide further clarity as to where infrastructure is in the food chain.                    

As a result of the report, the S15CSTE index of construction and engineering companies, which has rallied 21% since President Trump’s election Nov. 8, fell as much as 3.2% Companies down more than 3% include GVA, AEGN, ACM, DY, MYRG.

CAT is the biggest decliner in Dow Jones Industrial, down as much as 2.6%