In his first address to a joint session of Congress last week, President Trump pledged to overhaul the immigration system; improve jobs and wages for Americans; deliver “massive” tax relief to corporations and to the middle class and for companies; and move forward with an Obamacare replacement.
Wow. That’s a heck of a to-do list! And it goes on …
He plans to make good on his campaign promises to rebuild our nation. That means asking Congress for $1 trillion in infrastructure investment, guided by his “Buy American and Hire American” mantra.
The president offered little on the specifics of his plan to upgrade America’s crumbling roads, bridges and waterways, only suggesting that it should be financed through both public and private capital and should create millions of new jobs in the process.
But the reality is it will be difficult to find new ways to finance such a large infrastructure package.
Now, we’re not saying that we’re against an infrastructure spending plan. Improving our roads, bridges, and waterways is certainly needed. We just don’t think our government can get a spending plan together that makes sense for all involved as quickly as the president anticipates.
But the markets clearly disagree with us.
In fact, after his speech, new life was breathed into some Trump reflation trades.
We remain wary that some of these investments — that have jumped into the stratosphere since the election — are simply moving too far, too fast. Especially, without more details.
For example, some of the moves in base metals look particularly overextended. Take copper for instance …
Copper is used in everything from building construction, power generation and transmission, electronic product manufacturing, and the production of industrial machinery and transportation vehicles. It should benefit from a massive infrastructure plan and has already seen prices move almost 15% higher since the election.
But we think the near-term party is over. As Larry’s AI chart below clearly shows, copper should make another small move higher before heading lower into earlier April.
Longer term, copper might be worth a look. But at this time, it’s best to stand aside. And this chart proves that.
All told, we think there will be a better time to buy copper and other investments that will benefit from a big infrastructure spending plan.
For now, keep your powder dry and most importantly, be patient. The opportunity to profit is coming.