Welcome to Thoughts on the Market. I'm Michael Zezas, Head of Public Policy Research and Municipal Strategy for Morgan Stanley. Along with my colleagues bringing you a variety of perspectives, I'll be talking about the intersection between U.S. public policy and financial markets. It's Wednesday, April 21st at 10:30AM in New York.
Last week we focused on 3 equity sectors that would be major beneficiaries of the kind of infrastructure legislation we expect will be made law in the US later this year. They were steel & cement, clean energy, and healthcare. Today, we discuss the unusual dynamic that’s making this possible - the likelihood that coal country, long resistant to federal policies promoting a transition to clean energy, is ready to embrace a green outlook.
Why is this dynamic essential to an infrastructure deal getting done? It boils down to counting votes in the US Senate, where Democrats’ 50 seats means that any single Democratic Senator has the power to derail legislation. That means that Democrat Joe Manchin of West Virginia is likely to take into consideration the impact on the coal industry which, by some estimates, supports over 15% of the state’s economic output.
But it seems that at least some key elements of West Virginia’s coal industry are ready to embrace a green initiative, which helps enable Senator Manchin’s vote for the infrastructure plan. As reported by the NY times, The United Mine Workers of America presented a plan on Monday advocating for a variety of investments and tax credits that would help provide ongoing employment for coal workers, either by retrofitting existing plants, subsidizing the manufacturing of solar panel and wind turbine parts, and/or funding the work to closing old mines. The plan was publicly rolled out at an event featuring Senator Manchin earlier this week.
So it seems the pieces are in place for a key vote in favor of an infrastructure plan, if it includes some of these policies to help coal workers transition to new work. And, in fact, the initial proposal in the American Jobs Plan includes many of these elements already. So we think investors should remain confident this legislation is coming, and will support key equity sectors like steel, clean energy, and healthcare; and continue to support the US economic recovery.
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