
Market Quote: Industrial Stocks Surge, Economic Data Awaits
Author: The editor's desk
March 6, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team.
It’s High Time
New all-time highs in gold and Bitcoin were part of a cornucopia of all-time highs registered this week across a variety of financial markets and asset classes. Although record highs are always welcome, not all investors have digested them in the same way, which has resulted in day-to-day swings in equity performance.
Granted, this is not that surprising considering the significance of economic data being released later this week and next. This data, which includes the latest U.S. employment and inflation figures, should help investors better map the path of bond yields for the remainder of 2024 and greater clarity – in any direction – would be a considerable development in terms of anticipating further sector, factor and asset performance, as well as any potential market leadership rotation.

Industrials Strength
The U.S. Industrials sector is witnessing a remarkable resurgence, with nearly 50% of companies trading at three-month highs thanks largely to the support of several secular tailwinds such as reshoring, electrification, and artificial intelligence (AI).
In recent years, U.S. industrial production (IP) has only grown at about 30% of U.S. GDP and consumer spending, largely because of outsourcing to China which led to cheaper consumer products but slower growth for U.S. Industrials. But that tide seems to be turning now that the U.S. is attracting what seems like unprecedented new investment. In fact, based on the current trajectory, growth in the country’s IP could once again outpace GDP and consumer spending much like it did in the five-decade span prior to China’s entry into the World Trade Organization (WTO) in 2001, according to UBS research.
We believe this structural shift has the potential to create a multi-decade capex opportunity for the U.S. Industrials sector that some estimate could be worth more than US$3 trillion. Notably, current investments in AI infrastructure exemplify this trade-off between spending capital now for future productivity gains. Yet, while leading Data Center and AI companies have already added substantial market capitalization as a result, some of the most exposed U.S. Industrials to this shift have seen relatively minimal equity uplift, suggesting more upside in these names may be forthcoming.

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