Investors ditch building material and machinery companies every time those extensions expire, according to an analysis by Kensho, a qualitative tool used by hedge funds. Companies like Martin Marietta Materials and Caterpillar tend to underperform the trading day after an expiration date relative to the S&P 500, based on the last six expirations.
Is there a good reason for traders to be worried on those days? Not especially, said Doug Hecox, a spokesman for the Federal Highway Administration (FHWA). Even in the worst case scenario—if Congress fails to reauthorize the FHWA's ability to distribute money from the trust fund—there is no reason to think that construction projects across the country will suddenly grind to a halt. That's because the fund simply reimburses states for ongoing projects, and the government will always follow through on those predetermined obligations one way or another.
"The states will be reimbursed, it's just a question of how soon," said Hecox. "The projects wouldn't stop. We all agree that it's not a good thing, but it's not going to result in a massive tsunami of unemployment."
For California, where the state is in the middle of 600 major transportation projects employing thousands, federal money pays for two thirds of construction projects, said Mark Dinger, spokesman for the California Department of Transportation. If the federal fund dried up, the state fund would also be bankrupt within two months, he said, but it's never come to that, and state engineers trust that the money will flow as promised.
The bigger question may be what a failure to get the fund under control would mean for the future. The same trends that have drained the fund over time—more efficient vehicles and slightly higher construction costs, as well as generally aging infrastructure—are only expected to make the gap wider in the next decade.
"This is the challenge that this Congress and the one before it have had, the recognition that we're entering some shallow water," said Hecox. It's simply not capable of sustaining the states the way it used to long term, without some fundamental change in how it's supported."