No matter who wins the White House, there is likely to be a big jump in infrastructure spending — and both Republican Donald Trump and Democrat Hillary Clinton may ultimately look to the same pot of gold to fund their spending, according to Strategas.
Trump made it clear when he unveiled his economic plan Monday that he's going to be a big spender on the nation's highways and bridges, though voters have heard him discuss it before. He also says he wants U.S. companies to repatriate their foreign cash, proposing a one-time tax holiday that would allow them to pay just 10 percent to bring their cash home. That money would be used to pay for infrastructure.
Democrat Hillary Clinton also proposes an infrastructure plan, and both candidates will have to get their proposals approved by Congress. The Democrats propose an infrastructure bank as part of their plan.
But both candidates could look to the repatriation tax holiday for the $2 trillion stashed overseas to cover some of the costs of their proposed infrastructure spending, according to Dan Clifton, head of policy research at Strategas.
Clifton said it's likely the House of Representatives remains Republican, and House Republicans are going to challenge either candidate on spending.
"You could even say that she'll be forced to do repatriation to get her infrastructure. She also wants to do renewable energy and broadband, and that's all negotiable," said Clifton.
Strategas put together a basket of infrastructure stocks, and that index is up 23 percent year to date. It includes 21 names such as Jacobs Engineering, KBR, Lennox International, Martin Marietta, Vulcan Materials, Granite Construction, Apogee Enterprises, Fluor Corp, Eagle Materials and Simpson Manufacturing.
Other names in the index are Dycom Industries,Gibraltor Industries, Masco Corp, Quanex Building Products, Headwaters Inc, Griffon Corp, NCI Building Systems, Universal Forest Products, Quanta Services and EMCOR
Clifton said despite the fact that both candidates had been strong proponents of infrastructure spending, the stocks have been more correlated to Clinton. "There's 92 percent correlation between their outperformance and her probability of winning," he said.
But Trump has been pushing a tax holiday, and stocks that would benefit from that are also gaining.
Strategas used seven companies with the most aggregate cash overseas as a proxy for the possibility of a repatriation deal. Those companies have been rising since mid-July and they are all tech, a sector that started performing better during earnings season.
They include Alphabet, Apple, IBM, Microsoft, Qualcomm, Cisco and Oracle.
The repatriation idea is not new. A voluntary repatriation was approved by Congress in 2004, and $300 billion of $600 billion stashed overseas returned to the U.S., according to Strategas.
In 2005, the companies that repatriated the most cash had no outperformance when compared to the S&P 500. But those that repatriated the most as a percentage of market cap doubled the S&P 500, according to Strategas.