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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.

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