Chemical companies’ performance
Many chemical companies’ stocks have rallied since President Trump was elected. Companies like Dow Chemical (DOW), DuPont (DD), and PPG Industries have returned 4.9%, 4.8%, and 6.6%, respectively, as of May 17, 2017. In the process, the companies outperformed the SPDR S&P 500, which returned 4.0%. However, companies like Eastman Chemical (EMN) underperformed the broader market.
President Trump’s policies
Some of President Trump’s policies are favorable for the chemical industry, while other policies aren’t as favorable. Although chemical companies’ stocks rallied, geopolitical tension between the US and North Korea reversed some of the gains. With regard to President Trump’s policies, talk about bringing down the corporate tax rate to 15% could be a big boost, while his stance on anti-globalization could hurt $200 billion in chemical exports.
President Trump’s economic stimulus policy and an increase in infrastructure investment are expected to have a positive impact on US GDP growth. Historically, demand growth for US chemicals outpaced US GDP growth. According to analysts, the US basic chemical industry is projected to grow 4.2% in 2017. Due to capacity expansion across the industry, growth could be ~6% in 2018 and 2019. On the other hand, US specialty chemicals are facing challenges due to sluggishness in oil and gas prices.
Investors can invest in chemical companies indirectly through the Materials Select Sector SPDR Fund (XLB). In the next part, we’ll look President Trump’s stance on the EPA.