Stocks Soared on Trump’s $1-Trillion Infrastructure Boom. But that Just Evaporated. Now What?

Stocks Soared on Trump’s $1-Trillion Infrastructure Boom. But that Just Evaporated. Now What? by Wolf Richter

Wall Street will have to go look for another mirage to hype.

During the campaign, President Trump explained that he’d fire up the economy and create jobs by spending $1 trillion on infrastructure. It’s in terrible shape and needs some big spending. It might have been material for rare bipartisan agreement.

The stock market has soared since the election, counting on this $1 trillion in new federal spending and “pricing it in.” Infrastructure stocks were hot. But by the looks of it, some folks are going to end up holding the bag…

Because there is not a trace of this huge spending plan in the 2018 budget blueprint released by the White House on Thursday. Instead, the blueprint slashed the budget of the Department of Transportation by 13% and cut out some existing plans for infrastructure spending.

Yet on February 12 — just days before the first efforts to defund existing infrastructure projects began to seep to the surface — I wondered incredulously if Trump and California “suddenly see eye-to-eye on high-speed rail,” because Trump, still brimming with enthusiasm about infrastructure spending, had told aviation CEOs this encouraging tidbit:

“And we have an obsolete plane system, we have obsolete airports, we have obsolete trains. We have bad roads. We’re going to change all of that, folks. You’re going to be so happy with Trump. I think you already are.”

And when the stock market opened in Japan, a major supplier of train system to the US, this happened… Trump Promises “Fast Trains,” Japan’s Railway Stocks Soar.

Days later, everything changed. In mid-February, the Department of Transportation announced that it would withhold its portion – $647 million – of funding for the Caltrain Electrification project. Caltrain runs 45 miles between San Francisco and San Jose in parallel with the awfully congested Highway 101, straight through Silicon Valley, a stretch that generates 14% of California’s GDP, and where 43% of the venture capital of the US is invested.

The $2 billion project entails buying electric trainsets to replace the diesel trains, installing overhead wire systems, improving tracks, etc. The current diesel trains move 65,000 people a day. After these improvements, it was hoped ridership would rise to 110,000 people a day and relieve some pressure on 101.

Caltrain estimated that the project would create 9,600 jobs in the Bay Area and throughout the US, including at a plant in Salt Lake City that would be built to assemble the new rail cars.

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.