Name: Vaccine rollout may limit upside for industrial stocks
Uploaded: 2021-02-27T18:41:48.000Z
Duration: 5 min 20 s
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Our focus today is the industrial sector, and our guest is Mike Hansen, senior vice president of Fisher Investments.

One sector that has done well over the past year is the industrial sector.

Despite an economy in tatters, the MSC I world industrials index is up about 20% over the past 12 months.

This index is heavily weighted in favour of US industrial giants, including Honeywell and Boeing, but also Germany's Siemens.

One explanation for the steady rise in industrial stocks has been that while the pandemic closed many service businesses, factories for the most part kept going and people who were stuck at home with extra time and money splashed out on manufactured goods.

So with the economy at a crossroads, where is this sector heading?

Let's ask Mike Hansen of Fisher Investments, Mike, Hi, Thanks for joining us.

Purchases have soared because of lockdown.

So does that mean a move back towards spending on services as the vaccine rolls out would be at the expense of industrials?

The answer is yes, and also know because industrials is a very complex category.

You have everything from aerospace and defense to commercial services, and so what you really have to do is make sure you're looking at the specific industry and companies in question.

But in some, though, yes, I do believe things will normalise.

There was some lesser consumption overall, but most consumption simply shifted to manufactured goods.

As we come out of the vaccine process and potentially toward a world that looks a little more normal, those things will shift back.

Certainly the change in those things, of course, is going to be moved a little bit by the stimulus packages that are happening in the United States and elsewhere, where there will be some excess spending where consumers will be allowed to spend a little more above trend than they did for a few quarters.

But I don't expect that to last very long.

I do instead expect consumers to instead just reallocate and shift back towards more goods and services.

But specifically those services that tend to dominate specifically, uh, the developed world's the developed countries of the world and are some of the recent price gains in industrials, perhaps a bit too dependent on the expectation that governments are about to invest heavily in infrastructure.

I think there's a little bit too much optimism there, Uh, the experience of 2000 and eight and the financial crisis and the global recession teaches us very much.

Uh, there was the notion that President Obama had about the shovel ready projects.

Uh, but in today's world, that is very bureaucratic.

We don't even really have very many proposals on the table globally for renewed infrastructure spending, and you first have to get all those things through.

And once you do, then you actually have to execute them.

Experience tells you that that that is at best years away, and as a result, I don't expect some of the optimism that's pervading and some of especially the manufacturing arm of industrials, to really carry forward, at least that which is based on infrastructure spending.

Overall, then is the industrial sector, or by a hold or sell for you.

Well, industrials, in fact, is not only a complex category, it skews small cap.

There are some of the huge large conglomerates there, but most of the companies in industrials are fairly small cap.

In addition, there are also value oriented.

And so when I put all that together, I say to myself, Well, yes.

Value has done well over the last several weeks as things like interest rates have moved, but stocks price well into the future.

And so we can't simply take one time effects and extrapolate those out very far into the future.

What I've been saying is that one time effects have a temporal effect, and as a result, the pop and industrial stocks, in my view, is likely to be fairly short lived.

And growth stocks are likely to be more like the output performers as the cycle progresses.

That was Fisher Investments senior vice president Mike Hanson.

Well, before I go, here are some of the top stories in the sector.

Daimler Trucks says a shift to zero emission vehicles will lead to thousands of job losses at the company's Germany Powertrain plants by 2033 although it said the cuts would be gradual.

French aerospace contractor Saffron says it forces a recovery from crisis after demand for jet engines dropped last year.

2020 recurring operating income fell 56% to $2.1 billion on a 33% drop in revenue for this year.

It said revenues would keep falling, but at a much lower rate of 2 to 4%.

And finally, Softbank backed robotics company Bark Shoes.

Grey has agreed to go public through a merger with a blank check firm in a deal worth $27 billion.

The Revolution Acceleration Acquisition Corporation is expected to give Bark Shoes Grey about $413 million as the logistics automation company takes advantage of a surge in online shopping.

 A C surged 18% on the news on Wednesday, and that's your roundup of the industrial sector Rome Elena Casas and this is Reuters. 