The American Reinvestment and Recovery Act was formed with a lot of money to be allocated and spent giving certain exchange traded funds (ETFs) a boost, but it appears there are other loopholes to face.
Under the Recovery Act, counties are allocated large sums of low-interest bonds to give to private projects. However, there are pros and cons to the Obama administration’s efforts to stimulate the economy. Investment projects — especially for infrastructure and new technologies — produce limited, delayed results. Programs intended to keep people afloat seem to do the most to lift the economy, states Charles Euchner of The New York Times.
Additionally, the program gives priority to shovel-ready projects, but these take a long time to get going and positively influence the economy. Infrastructure projects are beneficial because they not only put construction workers on the job, they also create a foundation for new waves of economic growth. Additionally, highways, airports and rail lines could increase the efficiency of local economies, and research and development could lead to innovation. (Where infrastructure ETFs go from here).
Another problem with stimulus funding, experts say, is that dubious projects too often jump to the head of the line. Projects with political backing win funding, regardless of merit, while more worthwhile projects languish for decades. (The stimulus effort has its critics.)
For more stories on infrastructure, visit our infrastructure category.
Two ETFs that have been hindered by this lag is the SPDR/FTSE Macquarie Global Infrastructure Fund (NYSEArca: GII) up 2.7% year-to-date; and iShares S&P Global Infrastructure (NYSEArca: IGF), up 12.4% year-to-date.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.