- 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.”
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.
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.”