Trader Talk

Stimulus Bill Gets Real


The stimulus bill is getting real, particularly the infrastructure component.

Now that the House Appropriations Committee has voted a big chunk of the stimulus ($358 billion) out of Committee and Ways and Means is marking up their part of the stimulus, traders are again taking a look at what effect stimulus will have on select stocks.

The big issue is that most believe the money can't get spent any time soon.

Congress is trying to rectify this. There is an effort to get funds to states--who disburse the money to contractors--ASAP. There is talk about getting the money disbursed to the states within 7 days of signing the bill, then requiring the states to disburse a significant portion of the money (say, 50 percent) within 120 days.

This helps clarify when money will be spent, and so far clarification has been in short supply.

That's why the effects of the stimulus plan on stocks have been modest at best. Looking at infrastructure, big machinery stocks like Caterpillar have not outperformed because there have been concerns that:

1) The size of the stimulus has been too small, and

2) The rapid global slowdown has trumped any stimulus package

Some engineering stocks have outperformed, particularly those, like Aecom, that have significant government contracts.

(since November 1)

AECOM Technology +43%

Jacobs Engineering +8%

Fluor +1%

S&P 500  -14%

Stimulus is here! Let the debate on stocks begin.



Questions?  Comments?