Construction material stocks to star in US market rally

Industrial and construction material stocks are predicted to be among the sectors that will shine as US markets hit fresh highs over the next year, experts report.

JPMorgan Private Bank’s Grace Peters, head of equities strategy at the wealth management arm of the US bank, reportedly said the S&P 500 will rise to between 3,500 and 3,600 points by the end of this year and then 3,750 by September 2021, representing a potential 10% increase from its close on 29 September at nearly 3,352 points.

US prices for construction materials are currently high and supply is low as demand rises amid supply chain challenges. Lumber, for example, has seen a 134% increase year over year. Pandemic-related lockdowns in the spring caused sawmills across the nation to close, resulting in a shortage of lumber on the market. Meanwhile, a surge in home renovations and do-it-yourself projects, coupled with a rise in new home construction, have increased demand.

Meanwhile, the US Chamber of Commerce Commercial Construction Index for the third quarter reported that 41% of contractors were worried about steel prices. A total of 54% of contractors surveyed, versus 45% in the previous quarter, reported they confront shortages for at least one material.

Hence, material price increases and rising stocks.

Peters told CNBC the outcome of the upcoming US election, in terms of whether President Donald Trump or Democratic nominee Joe Biden would win, was “unlikely to materially drive share prices” longer term. This was based on JPMorgan’s analysis of markets in the years of US elections going back to the 1930s.

She said company earnings were more important in driving share prices.