Both Democratic and Republic presidential front runners may disagree on many hot-button subjects but the two agree on the need to upgrade the our country’s aging infrastructure. Investors can capitalize on the potential increased government backing in the sector with infrastructure-related exchange traded funds.
Democratic nominee Hillary Clinton believes the U.S. is “dramatically underinvesting in our future” and wants to fund projects like roads and water ways while Republican nominee Donald Trump has stated that our country’s infrastructure is “terrible” and airports are a “disgrace,” promising to “start the greatest long-term building project in American history,” reports Brian Chappatta for Bloomberg.
The American Society of Civil Engineers calculated that the U.S. will fall $1.44 trillion short of the $3.32 trillion required to inves tin infrastructure through 2025.
Clinton’s website outlined a plan that would raise federal spending on public projects by $275 billion over a five-year period and construct a national infrastructure bank that would run an expanded Build America Bonds program.
According to Trump’s book, “Crippled America: How to Make America Great Again,” he has called for a “trillion-dollar rebuilding program” that will be “one of the biggest projects this country has ever undertaken.”
While the federal government goes through the political throes, states and cities seem to be ahead of the curve, spending billions of on infrastructure projects. The recent spending is still only a drop to what is needed, but municipal officials who have hesitated to borrow are beginning to loosen their purse strings.[related_stories]
“You have budget surpluses in a number of states, and extremely low yields available in the market right now allow them to borrow at attractive rates,” R.J. Gallo, head of the municipal bond group at Federated Investors, told Bloomberg. “It all adds up that you’re seeing more new-money financing and more public construction. The muni market can certainly handle it.”
Municipalities have capitalized on the record low interest rates by issuing $67.3 billion in debt for infrastructure in the five months through May, the most since 2010. Over the past year, states have also increased spending on public construction to the most since 2010.
“Recent history tells us that simply having low interest rates is not going to be what drives cities to take on new debt,” Christiana McFarland, director of research in Washington at the National League of Cities, told Bloomberg. “The looming threat of infrastructure needs is certainly putting cities in a position to do everything they can to take on those projects now.”
Investors interested in gaining exposure to the broad infrastructure sector can take a look at a number of ETF options available.
- iShares Global Infrastructure ETF (NYSEArca: IGF)
- SPDR FTSE/Macquarie Global Infrastructure (NYSEArca: GII)
- iShares S&P Emerging Markets Infrastructure Index Fund (NYSEArca: EMIF)
- ProShares DJ Brookfield Global Infrastructure ETF (NYSEArca: TOLZ)
- FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA)
- PowerShares Global Emerging Markets Infrastructure Portfolio (NYSEArca: PXR)
- Deutsche X-trackers S&P Hedged Global Infrastructure ETF (NYSEArca: DBIF)
- Guggenheim High Income Infrastructure ETF (NYSEArca: GHII)
For more information on the infrastructure sector, visit our infrastructure category.