We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
The construction sector, both non-residential and residential, is leading the way.
To real output growth.
Construction Industry and U.S. Markets
The Construction sector in the USA has been a ‘hot’ area to invest in over the last two post-COVID years.
In terms of Macro-Economics variable, I can show you how this narrative played out, for both Residential and Non-Residential Construction.
From 2020 to 2022, ultra-easy Fed monetary policy cut down 30-year fixed Housing mortgage rates in the USA, lifting the Average and Median sales price for U.S. homes — whether existing or new — to new sales price heights.
Consult the charts below on that.
Image Source: Zacks Investment Research
Once the Fed hiked policy rates to 5.33%, sending 30-year fixed mortgage rates up to 7 to 8%? The U.S. housing narrative changed dramatically. As the top right chart shows, Houses Sold has gone sideways for 7 seven years. Meanwhile Houses for Sale have expanded dramatically. Where does this noted imbalance go from here? We shall see!
Then, add on the dramatic Non-residential Construction spending boom, driven up by the U.S. infrastructure package.
Consult the final lower chart below on that.
Image Source: Zacks Investment Research
The Zacks August 2024 Sector/Industry/Company Telescope
The July 31st, 2024 Zacks Industry Ranks showed a more cyclical set-up.
The late summer ranks showed three Very Attractive sectors: Info Tech and Industrials again. Plus Utilities.
The ranks showed three Attractive sectors: Consumer Discretionary, Financials and Health Care.
Zacks Industry Ranks showed just two Market Weight sectors: Communication Services and Materials.
Energy and Consumer Staples were found at the back, as two Unattractive sectors.
(1) Info Tech stayed Very Attractive. Misc. Tech and Semis led again.
Company Description: Taiwan Semiconductor Manufacturer Co. (TSM - Free Report) is the world's largest dedicated integrated circuit foundry.
As a foundry, the company manufactures integrated chips (ICs) for its customers based on their proprietary IC designs using its advanced production processes.
TSM's goal is to establish itself as one of the world's leading semiconductor companies by building upon the strengths that have made it the leading IC foundry in the world.
(2) Industrials stayed Very Attractive. Business Products, Conglomerates, Machinery – Electrical, and Construction – Building Services kept looked strong.
Company Description: Holcim Ltd. (HCMLY - Free Report) provides building solutions. Its business segment includes Cement, Ready-Mix Concrete, Aggregates and Solutions & Products.
Holcim Ltd., formerly known as LaFarge-Holcim, is based in Zug, Switzerland.
(3) Utilities rose to Very Attractive from Market Weight. Utility - Telephone and Utility-Gas Distribution looked best.
Company Description: Iberdrola, S.A. (IBDRY - Free Report) operates as an energy group, which provides utilities and wind power.
It is primarily involved in electricity distribution, gas distribution and telecommunications.
In its electricity distribution segment, it plans, develops and operates the distribution network, provides the service within regulatory quality of service, measures usage at the supply points, bills access and full rates until the last resort rate is established and runs demand management programs.
The main work of gas distribution segment involves carrying gas from the network to the end user's installation.
The company also operates telecommunications infrastructure which consists of different networks such as backbone (fiber optic and PLC), transmission, data-switching, voice-switching and radio.
Image: Bigstock
Construction Drives Growth: Zacks August 2024 Strategy
The following is an excerpt from Zacks Chief Strategist John Blank’s full Aug Market Strategy report To access the full PDF, click here.
Late summer is here.
The construction sector, both non-residential and residential, is leading the way.
To real output growth.
Construction Industry and U.S. Markets
The Construction sector in the USA has been a ‘hot’ area to invest in over the last two post-COVID years.
In terms of Macro-Economics variable, I can show you how this narrative played out, for both Residential and Non-Residential Construction.
From 2020 to 2022, ultra-easy Fed monetary policy cut down 30-year fixed Housing mortgage rates in the USA, lifting the Average and Median sales price for U.S. homes — whether existing or new — to new sales price heights.
Consult the charts below on that.
Image Source: Zacks Investment Research
Once the Fed hiked policy rates to 5.33%, sending 30-year fixed mortgage rates up to 7 to 8%? The U.S. housing narrative changed dramatically. As the top right chart shows, Houses Sold has gone sideways for 7 seven years. Meanwhile Houses for Sale have expanded dramatically. Where does this noted imbalance go from here? We shall see!
Then, add on the dramatic Non-residential Construction spending boom, driven up by the U.S. infrastructure package.
Consult the final lower chart below on that.
Image Source: Zacks Investment Research
The Zacks August 2024 Sector/Industry/Company Telescope
The July 31st, 2024 Zacks Industry Ranks showed a more cyclical set-up.
The late summer ranks showed three Very Attractive sectors: Info Tech and Industrials again. Plus Utilities.
The ranks showed three Attractive sectors: Consumer Discretionary, Financials and Health Care.
Zacks Industry Ranks showed just two Market Weight sectors: Communication Services and Materials.
Energy and Consumer Staples were found at the back, as two Unattractive sectors.
(1) Info Tech stayed Very Attractive. Misc. Tech and Semis led again.
Zacks #1 Rank (STRONG BUY): Taiwan Semiconductor (TSM - Free Report)
Company Description: Taiwan Semiconductor Manufacturer Co. (TSM - Free Report) is the world's largest dedicated integrated circuit foundry.
As a foundry, the company manufactures integrated chips (ICs) for its customers based on their proprietary IC designs using its advanced production processes.
TSM's goal is to establish itself as one of the world's leading semiconductor companies by building upon the strengths that have made it the leading IC foundry in the world.
(2) Industrials stayed Very Attractive. Business Products, Conglomerates, Machinery – Electrical, and Construction – Building Services kept looked strong.
Zacks #1 Rank (STRONG BUY): Holcim Ltd. ADR (HCMLY - Free Report)
Company Description: Holcim Ltd. (HCMLY - Free Report) provides building solutions. Its business segment includes Cement, Ready-Mix Concrete, Aggregates and Solutions & Products.
Holcim Ltd., formerly known as LaFarge-Holcim, is based in Zug, Switzerland.
(3) Utilities rose to Very Attractive from Market Weight. Utility - Telephone and Utility-Gas Distribution looked best.
Zacks #1 Rank (STRONG BUY): Iberdrola (IBDRY - Free Report)
Company Description: Iberdrola, S.A. (IBDRY - Free Report) operates as an energy group, which provides utilities and wind power.
It is primarily involved in electricity distribution, gas distribution and telecommunications.
In its electricity distribution segment, it plans, develops and operates the distribution network, provides the service within regulatory quality of service, measures usage at the supply points, bills access and full rates until the last resort rate is established and runs demand management programs.
The main work of gas distribution segment involves carrying gas from the network to the end user's installation.
The company also operates telecommunications infrastructure which consists of different networks such as backbone (fiber optic and PLC), transmission, data-switching, voice-switching and radio.
Iberdrola, S.A. is based in Bilbao, Spain.
(4) Consumer Discretionary stayed Attractive. Non-food Retail/Wholesale looked good.
(5) Financials rose to Attractive from Market Weight. Banks-Major looked best.
(6) Health Care rose to Attractive from Market Weight. Medical Products looked best.
(7) Communications Services stayed at Market Weight. Telco Equipment was the best.
(8) Materials rose to Market Weight from Unattractive. Containers & Glass look strong.
(9) Energy fell to Unattractive from Attractive. Oil/Gas Pipelines looked the best.
(10) Consumer Staples fell to Unattractive from Market Weight. Tobacco and Food/Drug Retail were the strongest groups.
Conclusion
Seeing a cyclical Zacks sector set-up is a strong tell.
Real U.S. (and global) growth remains strong.
Enjoy the rest of my August 2024 Zacks Market Strategy report!
Warm regards,
John Blank, PhD
Zacks Chief Equity Strategist and Economist