You might think that a weak infrastructure is a problem unique to developing countries. Here’s a shocker, then: it’s not. The United States needs some huge upgrades, and therein lies the exchange traded fund (ETF) opportunity.
Most experts agree that the U.S.’s infrastructure needs an upgrade, though some go further and say it needs an overhaul. Knowledge at Wharton says that tragedies such as the gas line explosion in San Bruno, Calif., and the Michigan oil pipeline that ruptured are examples of the need for new infrastructure yesterday. [5 Infrastructure ETFs With Room To Grow.]
Much of what’s in place is old.
According to government data, most gas pipelines were installed and put into use in the 1970s. And pipelines are just one angle of infrastructure. U.S. roads, bridges, highways, the power grid and water are examples of other areas that need a serious face-lift. [Building the Case for Infrastructure ETFs.]
So the major question is where will the money come from to finance this? Look to Washington, for starters, because without policy changes, state and local governments will only be able to raise about one-third of the $200 billion needed each year to improve and maintain our transportation infrastructure.
The improvements have gotten a start with President Obama’s $50 billion pledge, along with the Build America Bond program. But we’ve got a long way to go to get where we need to be. The good news is that both infrastructure ETFs below are above their 200-day moving average. If the movement to build our nation’s ailing roads and bridges catches on, these funds could be an early-floor opportunity:
- SPDR FTSE/Macquarie Global Infra 100 (NYSEArca: GII): The United States is 40.4%
- iShares S&P Global Infrastructure Index (NYSEArca: IGF): The United States is 24.4%
Tisha Guerrero 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.