increased demand for construction leading to rise in construction materials stocks, according to report
Stocks in construction materials are expected to see a significant increase in 2021, after declining earlier this year due to the pandemic economy.
A forecast issued by the JP Morgan Private Bank is predicting that, as stocks overall are expected generally to rise in the new year, any stocks having to do with building materials may be among the leaders.
JP Morgan is specifically forecasting an S&P 500 increase of up to 3,750 points between January and September of next year. Looking at it from the context of this month, that would mean a 10% increase.
In an interview with the business news program Squawk Box Europe, Grace Peters, head of equities strategy for JP Morgan, said her company is looking at businesses likely to benefit from increased government spending as those most likely to grow.
But while proposed government spending for construction projects is almost always a precursor for an increase in construction materials stocks, sometimes that spending doesn’t materialize.
Such was the case earlier this summer when construction materials stocks jumped by 15% upon news of President’s Trump’s $1 trillion infrastructure proposal.
Due to differences among Congressional leaders, that proposal never became reality.
While overall building materials stocks suffered a double-digit decline in the first quarter of this year, the sector has enjoyed a 9% gain this fall, as construction projects across the country have picked up.
A separate report issued by Moody’s Investors Services notes that the building materials market in general has been buoyed by steady demand.
In a statement, Emile El Nems, an analyst with Moody’s, predicted: “We expect sequential improvement in economic activity, steady demand from the residential and public infrastructure end markets, coupled with a low interest rate environment, to keep activity and profitability in the building materials industry stable.”
By Garry Boulard
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