Investors' enthusiasm around Trump's infrastructure spending may be overdone, Credit Suisse says, downgrades steel industry

A contractor moves steel rebar while working on the construction site in New York.
Victor J. Blue | Bloomberg | Getty Images

Enthusiasm around President-elect Donald Trump's infrastructure spending policies may be excessive, Credit Suisse told clients Thursday, prompting the firm to downgrade the steel sector to market weight from overweight.

"We are concerned the Trump boost to equity valuations is overdone, as our analysis suggests limited benefits from infrastructure spending growth," equity analyst Curt Woodworth wrote in a note to clients.

After two consecutive years of sharp losses between 2014 and 2015, steel prices rallied in 2016 on signs of improving demand and hopes for greater fiscal spending under Trump, a move that's caused shares of steel producers to rally along with the metal.

"While demand-side fundamentals have sharply improved since late October driven by restocking in the supply chain, trend line data points have been generally weak over the past several quarters despite trade case support," Woodworth said.