Leading up to the presidential election, investors widely expected that infrastructure stocks and ETFs stood to benefit regardless of the election’s outcome.
Though just one example, the Guggenheim High Income Infrastructure ETF (NYSEArca: GHII) traded slightly higher Wednesday after President-Elect Donald Trump overtly mentioned bolstering America’s infrastructure in his victory speech.
GHII, which is composed of the 50 highest-dividend-paying global infrastructure companies, has been the best performing infrastructure-related ETF of 2016, rising 29.1% year-to-date, compared to IGF’s 16.5% gain and GII’s 16.0% return. GHII also includes a larger U.S. tilt at 52.1% of its portfolio and a 21.2% position in Canadian companies.
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.
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]
GHII “was formed back in early 2015 and its assets are allocated across 51 holdings. Among the top 10 holdings are Williams Companies Inc. (WMB), the energy company from Oklahoma and Golar LNG Limited (GLNG) which is engaged primarily in the transportation, regasification, liquefaction and trading of LNG,” according to a Seeking Alpha analysis of infrastructure ETFs.
GHII’s recent outperformance may be attributed to its asset category allocations. Specifically, the infrastructure ETF is the only one of six ETFs in Morningstar’s Infrastructure category that has a mid-cap value tilt.
As growth stocks fell out of favor this year in response to heightened volatility in the earlier months, the value style came back into play. So far this year, value stocks have been outperforming the growth category, with conservative bets gaining prominence as a safety play. Additionally, within the value category, dividend stocks also garnered a lot of attention after a dovish Federal Reserve signaled fewer interest rate cuts this year, prolonging a low-yield environment.
For more information on the infrastructure sector, visit our infrastructure category.
Guggenheim High Income Infrastructure ETF
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.