PLAYING THE CAPEX THEME
John Lynch Chief Investment Strategist, LPL Financial | Jeffrey Buchbinder, CFA Equity Strategist, LPL Financial
Capital investment is accelerating, a trend we believe should continue. One of the most encouraging aspects of the U.S. economy currently is that capital spending is accelerating just as some tailwinds are starting to kick in. As we discuss in this week’s Weekly Economic Commentary, capital expenditures (capex) are being supported by several factors, including strong earnings growth, corporate tax cuts, immediate expensing of capital investments, repatriation of overseas cash, high business confidence, and deregulation. So how should investors play this theme?
INDUSTRIALS IN THE SWEET SPOT?
Industrials are the most straightforward play on capital spending. But despite the recent pickup in capex and robust manufacturing activity, the sector has struggled [Figure 1]. Escalating trade tensions have played a large role because of the sector’s significant exposure to global trade....