15
SEPTEMBER 2013
ACT
BUSINESS NEWS
AUTHOR:
CHRIS SLEIGHT
is one of
the world’s most internationally
renowned construction
business writers, with
specialist expertise in financial
markets and stock market
analysis. He is editor of KHL’s
market-leading
International
Construction
and is a regular
contributor to
ACT’
s
sister publication,
International Cranes
and Specialized
Transport
.
The mainstream
market indices
continued to fly
high through
the mid-summer
period, while the
heavy equipment
sector continued
to weaken.
Chris
Sleight
reports
T
he Dow continued
to set record highs
throughout July
and August, and remained
well above the unprecedented
15,000-point mark for much
of the mid-summer period. Its
new found growth, and that
of other benchmarks like the
NASDAQ and S&P 500, came
as investors shrugged off any
fears about the tapering off of
quantitative easing – the Fed’s
policy of ‘printing money’ to
boost the economy.
No net gains
In contrast to the gains of
20 percent or more seen by
these indicators over the last
12 months, the
ACT
Heavy
Equipment Index (HEI)
continued to fall over the
summer. By late August it was
back to where it was a year
ago, with no net gains and no
clear trajectory.
This separation of fortunes
dates back to around the
start of 2013, and reflects the
different drivers for blue-
chip stocks and benchmark
indicators, compared to the
equipment industry.
As impressive as the Dow’s
growth has been, it does not
seem to be warranted by the
current economic picture.
Although the recovery has
taken root, it looks a little
tepid – GDP growth will be
about 2 percent this year,
and unemployment is taking
time to fall. Hardly the
conditions you would expect
to herald record stock market
valuations.
The most likely explanation
is that the Dow and other
well-known indicators
have become the new safe
haven for investors. The
price of gold is in decline,
and the low interest rate
environment means bonds
are not particularly attractive.
Although equities offer more
risk, blue-chips are seen as
relatively safe, and offer a
steady return on investment
through dividends.
In contrast, the heavy
equipment sector’s
performance reflects the
ACT Heavy Equipment Index (HEI)
DOW
NASDAQ
S&P 500
25%
20%
15%
10%
5%
0%
-5%
-10%
% change
52 weeks to August 2013
challenging year being
experienced on global
equipment markets. The
buoyancy has gone out of
many emerging countries
– most notably China–
and economic growth in
developed parts of the world
is not yet strong enough to fill
the void.
Global reflections
As a result, sales and profits
for the industry this year have
been lackluster, and most
manufacturers are looking
to late 2013 or into 2014 for
the situation to improve. The
performance of the ACT HEI
is a reflection of this.
So while it looks like the
ACT
HEI is somehow missing
out on the wider stock market
rally, it is arguably the case
that this index is a fairer
reflection of global conditions
in the industry. The rally is
due more to investors’ need
for a safe haven for their
funds at a time when the more
traditional destinations are
not looking attractive.
■
ACT’
s Heavy Equipment Index
(HEI) tracks the performance
of eight of America’s most
significant, publicly-traded
construction equipment
manufacturers – Astec
Industries, Caterpillar, CNH,
Deere & Company, Joy Global,
Manitowoc and Terex.
Rally retreats
