Trump win is great news for an obscure group of stocks—and the rally may just be getting started

Industrial metals stocks have soared following Donald Trump's presidential win, apparently due to the belief that his administration will increase infrastructure spending in the U.S. and further tamp down on China-produced steel.

AK Steel, U.S. Steel and Century Aluminum are all up over 30 percent since the election, and some say these names are poised for further upside.

"I definitely think we have more room to grow," and the rally could very well continue into 2017, Eddy Elfenbein, editor of the Crossing Wall Street blog, said this week on CNBC's "Trading Nation."

Trump has proposed a $1 trillion infrastructure plan; if implemented, that could be expected to lead in additional demand for steel, obviously an important component in many infrastructure products. Meanwhile, his proposal to reduce imports of Chinese products could be good news for domestic steel producers.

Indeed, a Trump presidency is bullish for U.S. commodity prices in general, said Jeremy Sussman, head of U.S. equity research and copper analyst at Clarksons Platou Securities.

"On one hand, he has pledged to spend on U.S. infrastructure, which would be bullish for iron ore, coking coal, & copper demand domestically. On the other hand, he has also threatened to impose a 45 percent tariff on Chinese imports in the U.S., which could potentially spark a trade war," Sussman wrote to CNBC.

But in the case of the latter, China would be "forced to stimulate domestic infrastructure demand, which would of course be positive for commodities, including copper," he wrote.

The SPDR S&P Metals and Mining ETF (XME) is up 10 percent since the election; its top holdings include AK Steel, U.S. Steel and copper mining giant Freeport-McMoRan.

On a technical basis, the XME is reflecting a changing environment for industrial metals, said Craig Johnson, senior technical research analyst at Piper Jaffray.

Examining a five-year chart of the XME, Johnson noted a recent reversal of its downtrend that began in 2014.

"This is substantial. And this is a clear change in psychology and sentiment in the market toward these areas," Johnson said Wednesday on CNBC's "Trading Nation," calling the current moves "a real shift. And it's going to last for a while."

Steel stocks have already logged a winning year — after being all but left for dead at the end of 2015, U.S. Steel and AK Steel have each risen more than 250 percent in 2016, mostly due to a U.S. government crackdown on Chinese steel.


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