These 4 sectors are set to benefit from President Biden’s American Families Plan, UBS says

Joe Biden Stimulus
  • President Biden is set to unveil the second part of his infrastructure-spending package, dubbed the American Families Plan.
  • UBS Wealth Management says greentech, semiconductors, financials, and industrials will benefit from the new bill.
  • The UBS team also believes Biden’s planned tax increases will only mildly affect earnings per share.
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In a new client note, UBS Global Wealth Management laid out four sectors set to benefit from President Biden’s second infrastructure spending bill, dubbed the American Families Plan.

Mark Haefele, the firm’s chief investment officer, said that unlike many market commentators, he doesn’t believe Biden’s infrastructure spending has been fully priced in.

According to Haefele, President Biden’s American Families Plan – together with the American Jobs Plan – could amount to a $4 trillion investment in US infrastructure, and much of it has yet to be accounted for.

Haefele’s UBS team said they believe four sectors will see gains from the historic infrastructure spend: greentech, semiconductors, industrials, and financials.

(1) Green tech

With “a meaningful portion” of President Biden’s infrastructure spending plan dedicated to decarbonization initiatives, UBS expects Greentech companies to be the biggest beneficiary of the incoming record spend.

Companies that operate in electric vehicles, renewable power, clean energy, energy efficiency, and water and electric grid upgrades should perform well, according to UBS.

The suppliers for Greentech firms are also set to outperform during 2021. UBS said it has been “tactically adding exposure” in Greentech firms and their suppliers over the last few months amid a pullback for high-flying tech names.

(2) Semiconductors

President Biden has allocated $50 billion to subsidize domestic semiconductor manufacturing and research in a move to combat China’s growing dominance in the field.

UBS expects this will help US-based manufacturers expand their footprint in 2021 and beyond, making the sector a top pick for investors.

Intel already announced plans to add $20 billion worth of foundry capacity in March.

(3) Industrials

The obvious pick to benefit from infrastructure spending is industrials, and UBS agrees. The wealth management office said steel and aggregate (cement) companies stand to benefit from Biden’s spending.

However, the UBS team also said it cut exposure to steel companies recently due to outperformance in the sector caused by supply imbalances.

The wealth management group said as supply constraints improve over the next year they expect steel companies to “come under pressure.” US Steel is already up nearly 250% over the past year alone.

(4) Financials

Finally, UBS believes the financial sector will benefit from infrastructure spending due to higher interest rates.

The wealth management office said a move toward higher interest rates as the economy reopens will “more than offset” modest drags from tightening regulations.

The team also said they see President Biden’s combined infrastructure plans boosting GDP by 0.5 percentage points and that earnings per share will grow 12% next year thanks to above-trend GDP growth.

Higher taxes, which are expected to pay for at least part of the infrastructure spending, will also only trim S&P 500 profits by about 4% in 2022, based on UBS’ research.

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These 3 sectors are set to boom on the back of Biden’s massive infrastructure spending plan, Morgan Stanley says

Biden
President Joe Biden has framed his infrastructure plan as a means of strengthening democracy and undermining autocracy.

  • President Biden has proposed around $4 trillion in infrastructure spending in two separate plans.
  • Morgan Stanley laid out three sectors set to benefit from the spending in the “Thoughts on the Market Podcast.”
  • The healthcare, clean energy, and cement/steel sectors were the investment bank’s top picks.
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Morgan Stanley highlighted three sectors set to benefit from President Biden’s infrastructure plan in the “Thoughts on the Market Podcast” with Michael Zezas on Wednesday.

President Biden unveiled his $2.3 trillion American Jobs Plan in late March and is reportedly readying another spending package that would bring the administration’s total infrastructure spend to roughly $4 trillion.

Morgan Stanley said the cement and steel, clean energy, and healthcare sectors will be the top three beneficiaries of the historic cash infusion.

This isn’t the first time the investment bank has recommended a group of stocks based on the recent rise in infrastructure spending.

In an early April note to clients, Michael Wilson, Morgan Stanley’s Chief Investment Officer, said he believes “investors should consider a mix of traditional cyclicals and new beneficiaries that will gain from the combination of strong economic growth, as well as federal initiatives to bring US infrastructure into the 21st century.”

Clean Energy

The extension of key green energy tax credits coupled with potential new tax credits from Biden’s spending plan are set to buoy the clean energy sector moving forward, according to Morgan Stanley.

The president’s plan also contains over $170 billion for electric vehicle technology, which Morgan Stanley says will help to bolster the sector despite high valuations.

In a note to clients on April 9, Wedbush’s Dan Ives echoed similar sentiments to the investment bank, saying that he believes Biden’s plan will bring about a “green title wave” for electric vehicles.

“The lifting of the 200k EV tax credit ceiling (restored to Tesla and GM) and a likely $10k+ EV tax rebate will be a major catalyst for EV growth in the US,” Ives said.

Cement and Steel

Morgan Stanley also highlighted the obvious beneficiaries of the infrastructure spending, cement and steel companies.

With $1 trillion set to be spent on transportation, water, and affordable housing, analysts at Morgan Stanley believe we are headed for an “infrastructure supercycle.”

The investment bank said over 200 million tons of cement will be used due to the infrastructure spending alone.

However, some market commentators question how much of the spending package has already been priced in.

When asked about which sectors may benefit from infrastructure spending, Burton Hollifield, a professor of finance at Carnegie Mellon University, told Insider that he believes much of the infrastructure spending bill has already been priced into equities.

Stock prices in the sector appear to back up Hollifield’s belief. Shares of US Concrete have already jumped 62% in 2021, and US Steel has followed suit, with shares rising 33% year-to-date.

Healthcare

Finally, Morgan Stanley analysts said they believe the healthcare sector will get a boost from President Biden’s new “human infrastructure” spending.

These “human infrastructure” measures include the expansion of affordable care act subsidies and a possible lowering of the medicare age.

Morgan Stanley says these changes would be a “fundamental positive for larger healthcare providers” as there will be more healthcare business to do overall, and larger healthcare companies would have the “scale to engage profitably.”

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