The US stock market surged to record highs yesterday. President Joe Biden gets ready to sign the $1 trillion infrastructure deal.
The House passed the Investing in Infrastructure and Jobs Act late last Friday. This clears the way for Biden to sign the bill into law.
Markets Cheered As $1T Infrastructure Deal Clears House
As a result, the markets cheered the prospect of renewed investments via government spending. For the first time, the S&P 500 closed above 4,700. Meanwhile, the Dow Jones Industrial Average went up over 100 points to close at 36,432.
Eric Diton, president and managing director of The Wealth Alliance, said that the infrastructure deal gives the economy a welcome shot in the arm.
“There are clear beneficiaries … construction, steel, railroads,” he said. Consequently, heavy industry stocks such as equipment makers and steel producers gained in value yesterday.
This includes heavy industries company Caterpillar and steel producers US Steel and Nucor. The Global X US Infrastructure Development ETF, which contains a basket of infra stocks, gained as well.
Other Industries Will Also Benefit From Passage of Infrastructure Deal
Sameer Samana, a senior global market strategist for Wells Fargo Investment Institute, hailed the infrastructure deal as well. He said other industries will also benefit from government spending.
The programs to upgrade transportation, broadband, electrical grids, and green energy will also help telecommunications and tech firms.
In addition, design and construction firms will also reap a windfall. In addition, many constructions and engineering firms help out even in the initial stages.
Meanwhile, Elizabeth Vermillion, equity analyst at CFRA, welcomes the long-overdue infrastructure spending. The nation’s crumbling infrastructure is long overdue for updates.
“Obviously, it’s something companies in the industry have been waiting for, for going on about four years now,” she said.
Many transportation officials, civil engineers, climate scientists, and others warned that the United States badly needed to spend more to maintain, repair, and update its roads, rails, and power grid.
“There’s more room for price growth once there are more specifics,” Vermillion said. “Obviously, these projects are long-term things. There’s definitely a lot of upside going forward” — anywhere from two to six years, she added.
Demand for Materials Will Grow
However, many are warning that with the flood of projects, ordinary Americans will have to compete with companies for materials such as fuel and building materials.
“It probably means inflation is going to be a little bit stickier than a lot of folks expect,” Samana said. If demand rises for materials, energy, and labor even as the supply chain crisis continues, expect even higher prices.
Even as politicians and economic managers argue on how much economic benefit the infrastructure deal will create, Vermillion said that’s beside the point.
The nation’s antiquated network of roads, bridges and other structures badly needs upgrades. “We need infrastructure. Even if it’s not (an) economic stimulus, it’s completely required and necessary,” she added.
Long Term Benefits
Meanwhile, many observers say that the economic benefits of the infrastructure deal pale in comparison to what the program will do for America’s future.
In addition, the infrastructure program can potentially reshape the way America competes with other industrialized nations.
This includes the availability of charging stations for electric vehicles, with railways offering an alternative mode of transport. Extended broadband services to rural areas can level the playing field between city dwellers and country folk.
If this happens, then the stock market will reflect these improvements. “If it goes as expected, it should help productivity in the broader economy, and that’s always a positive,” Samana said. “It’s the closest thing you get to a free lunch.”
Watch the ABC News video reporting that Biden’s bipartisan trillion-dollar infrastructure bill passes House:
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