Construction & Engineering: A Bullish Rebound in 2010

James | Oct 26, 2009 | Comments View Comments

Assessing the current conditions of the capital markets, I am always searching for the next bullish sector. Heading into 2010, I believe Construction and engineering will be a bullish sector and this is why.

Why Construction and Engineering will be a Bullish Sector?

In 2010, I foresee the sluggish global economy picking up its pace and an increase in spending on capital projects. In my opinion, China will continue to spend billions on infrastructure to maintain their world dominance. I foresee the Middle East, Africa, and Eastern Europe to pledge billions to the construction of infrastructure projects to energize growth in their developing regions. Finally, I believe Brazil will lead a resurgence in capital spending across the board in Latin America as they prepare for the 2016 Olympics. In 2009, construction equipment orders have kept stable and have continued to increase due to the large amount of global infrastructure demand. I have no reason to believe that this would not continue to increase throughout 2010. To better the situation, I believe that credit conditions should lighten up allowing for a large amount of delayed construction projects to begin operations again. With recent increases in oil and gas prices, I expect us to see a gradual rebound in oil and gas projects as well. I also anticipate the U.S. to increase its capital spending for highways, tunnels and bridges in 2010 aided by Obama’s $787 billion economic stimulus package and federal/local spending. Going against these predictions are theories that the global markets will continue to struggle. I disagree, for one we have seen great strides recently in the improved economic forecast. As for the sector itself, most major oil companies have already increased capital spending plans as oil is back over $80 a barrel. In the New Year, I expect capital markets to lighten up allowing more lending to take place. Building off this, acquisitions activity should increase as companies have access to lower borrowing rates and attractive multiples. Overall, we are seeing a resurgence in capital projects which helps the markets across the board as demand for commodities and resources will increase. As you have read I am bullish on both the energy sector, especially Oil and Natural Gas as well as construction. To read my past articles on Natural Gas and Oil click on the links. Moving on, here’s a list of top construction and engineering stocks to invest in.