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Quarter-End Insights

Basic Materials: U.S. Construction Activity Provides Shelter From the Storm

U.S. manufacturers of coatings, lumber, and long steel products are likely to be relative winners.

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  • The basic materials sector is trading below our aggregate fair value estimate at a price/fair value of 0.95 on an equal-weighted basis.
  • As a result of the deceleration of fixed-asset investment growth in China, our sector outlook points to limited price appreciation for most commodities through the end of the decade.
  • Investors can look to exposure to U.S. construction spending for more attractive growth prospects.
  • The coatings, lumber, aggregates, cement, and steel industries are likely to be relative winners given our expectation for improving U.S. construction.

Andrew Lane does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.