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In Trump market rally, infrastructure may be overdone, strategist says

Infrastructure stocks have been rallying since President-elect Donald Trump's victory Nov. 8, but one well-known strategist told CNBC the move may be "overdone."

Trump has promised to make infrastructure spending a priority in his administration.

While Citi's chief U.S. equity strategist Tobias Levkovich thinks tax cuts, capital spending benefits and a boost in consumer spending are likely to happen during the Republican's term, he said he's "less convinced of the infrastructure story."

State and federal agencies are in the process of replacing the Governor Malcolm Wilson Tappan Zee Bridge (usually referred to as the Tappan Zee Bridge) over New York's Hudson River.
Andrew Holbrooke | Corbis | Getty Images
State and federal agencies are in the process of replacing the Governor Malcolm Wilson Tappan Zee Bridge (usually referred to as the Tappan Zee Bridge) over New York's Hudson River.

Because Trump's proposal is more about a private-public joint venture, a lot of states and municipalities may not get on board, Levkovich noted.

"It doesn't get Democrats on board and Republicans are pushing back a little bit because whatever tax they do collect, for example on a repatriation agreement on overseas cash, they would like to see that kind of be benchmarked against other tax cuts. In other words, try to make this as revenue neutral as possible, don't blow out deficits," he said in an interview with "Power Lunch."

Tax cuts , on the other hand, should be positive for the market.

Trump has proposed slashing the corporate tax rate from 35 percent to 15 percent. Levkovich doubts it will land so low, but said even a 20 percent rate would be beneficial.

Right now, the effective tax rate has been about 27 percent for the S&P 500, he said. And for every 1 percent of tax rate decline, there is over 1 percent of earnings benefit.

"The question is what do you pay for tax-related benefits. I think it won't be the full multiple, but it's still meaningful," he said.

And while a rising dollar will negatively impact earnings, he said investors will still come out ahead.

Meanwhile, people are still positioned cautiously, and that's good news for the market long term, Levkovich said.

"That generates a near 97 percent probably of higher stock prices a year from now."

However, "I suspect markets have probably run a bit too far in the very near term. But everybody kind of wants it higher. We're in a holiday spirit I guess."

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