19
JUNE 2014
ACT
BUSINESSNEWS
AUTHOR:
CHRISSLEIGHT
is
one of theworld’smost
internationally renowned
construction businesswriters,
with specialist expertise in
financial markets and stock
market analysis. He is editor
of KHL’smarket-leading
International Construction
and
is a regular contributor to
ACT’
s sister publication,
International Cranes
and Specialized
Transport
.
April andMay
saw the heavy
equipment sector
continue to rally as
themainstream
market indicators
stagnated.
Chris
Sleight
reports.
R
egular readers of
this columnwill
remember that
over the last 18months or
so,
ACT
has bemoaned the
fact that thewidermarkets
have enjoyed a remarkable
rallywhile theAmerican
constructionmachinery
sector, asmeasuredby the
ACT
HeavyEquipment Index
(HEI), has not donemuch
better than standing still.
However, the last fewmonths
have seen the situation
reverse, withmeasures like
theDow,NASDAQ andS&P
500 indexes leveling-off, while
themachinery segment has
seen good growth.
This comes down to the fact
that different drivers have
been atwork indifferent
parts of the stockmarket. In
2013, indicators like theDow
were seen as a safehaven at a
timewhenmore traditional
stores ofwealthwere
underperforming. Goldwas
on the slide and instruments
likeT-Bills couldonlyoffer
weak yields.
However, two things have
happened since the start of
the year. First, the tapering
of quantitative easing (QE),
which is to say theFed’s
windingdownof itsmoney-
printingprogram, has seen
money flowback to the
U.S. from riskier emerging
economies as domestic
yields have improved. This is
because there is lessmoney
chasing these investments
as theFed’s newmoneyhas
beenmore scarce– a classic
swing in supply anddemand
dynamics.
This hasmeant there are
more games in town for
investors looking for a safe bet
withmoderate yields than just
theDow andother blue chips,
somoneyhas gone out of
the stockmarkets intobetter
performingbonds.
That explainswhy indicators
like theDowhave leveled-off
or aredeclining, butwhy is
theheavy equipment sector
on the rise?
The simple answer seems
tobe improvingmarket
ACT Heavy Equipment Index (HEI)
DOW
NASDAQ
S&P500
40%
35%
30%
25%
20%
15%
10%
5%
0%
5%
-10%
% change
52weeks toMay 2014
conditions, leading tobetter
corporateperformance. First
quarter financial results for
some of the bigmanufacturers
point to strengthening
demand for construction
equipment, although those
involved inmining still seem
tobe saying that this sector is
still falling.
Nevertheless, the improving
constructionmarket, ledby
residential construction, is
finally stimulating greater
volumes of construction
equipment sales at home, and
market conditions seem to
be improving in some export
destinations.
There are some exceptions
of course, andQ1numbers
for crane sales byboth
Manitowoc andTerexpointed
to adownturn.However, both
companieswere bullish in
their forecasts for the latter
part of the year.
As ever, timewill tell,
but for themoment there
is apalpable sense of
optimism among equipment
manufacturers.
■
ACT’
s Heavy Equipment Index
(HEI) tracks the performance
of eight of America’smost
significant, publicly-traded
construction equipment
manufacturers – Astec
Industries, Caterpillar, CNH,
Deere & Company, Joy Global,
Manitowoc and Terex.
Rally continues
