We have been bearish on the Industrials sector for much of 2018. Are we heading towards another recession in that sector like the one that hit in 2015 and 2016?
Hedgeye Industrials analyst Jay Van Sciver sees rough going for Industrials, at least over the next 3 to 6 months, partly caused by difficult comps up against the spending spree the sector went on ahead of tax reform.
“There was this expectation in the sector that everybody was going to go out and buy a backhoe for Christmas and expense it and bring their taxes down,” Van Sciver explains in the clip above. “That’s not really the way it played out. And now you’re facing much harder comps.”
Overall however, the drop-off does not look like it will be as steep as the one a few years ago – for now.
“We remain data dependent,” Van Sciver says.
“Could we see a real blow-up in a more specific sector like the ag space? Sure. But we haven’t seen it yet, and we don’t see a ton of really dramatic downside like in 2016.”
Watch the full clip above for more.