Just when stocks looked to be hitting a sticky patch, new stimulus measures by the US Federal Reserve and reports of a potential Trump administration $1trn infrastructure splurge have given the market recovery new life.

Particularly in demand were companies seen as beneficiaries of spending across the Atlantic on roads, bridges and 5G broadband infrastructure.

The speculation about Trump’s spending plan was timed nicely from the point of view of tool hire outfit Ashtead (AHT) as it coincided with a resilient set of financial results (16 Jun) and the company’s decision to keep paying dividends.

In the 12 months to 30 April 2020 Ashtead derived more than 85% of its revenue from the US so it is logically a beneficiary if construction firms across the pond are needing to hire lots of cement mixers, generators, diggers and the like to fulfil new federal contracts.

Any fresh driver of demand could also underpin the company’s commitment to dividend growth.

Other firms which rallied on talk of the Trump spending plan included infrastructure specialist Hill & Smith (HILS), plumbing kit business Ferguson (FERG) and building products firm CRH (CRH), all of whom have a US presence.

Stockbroker Davy said: ‘The president has often talked about infrastructure stimulus but, to this point, that has been just that – talk. However, given the impact of the pandemic and the looming election, we believe the odds of getting something over the line are growing.’

Rumours of the infrastructure package came alongside news the US Federal Reserve would step up its own stimulus efforts by buying corporate bonds.

It is worth investors questioning why the Fed is so keen to act. It almost certainly reflects nervousness on the part of the central bank about a possible second wave in the coronavirus pandemic and how fragile any recovery from the crisis will be.

Kingswood Wealth Management’s chief investment officer Rupert Thompson observes: ‘A period of consolidation, while it becomes rather clearer how well economies navigate the difficult months ahead, would make a lot of sense.

‘However, with the surge in liquidity still in the driving seat for most of the time, hopes for a period of market calm and reflection look likely to prove wishful thinking.’

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