The iShares Global Infrastructure ETF (NYSEArca: IGF) slumped more than 2% last week, sending the popular infrastructure exchange traded fund to critical technical support. IGF is still up 15.3% year-to-date, a decent performance, but one that lags the S&P 500.
While he was campaigning, President Donald Trump’s pledge to spend $1 trillion shoring up U.S. infrastructure needs was seen as a potential catalyst for the related exchange traded funds. Still, it could take some time for infrastructure ETFs to see the full benefit of Trump’s still nascent infrastructure plans.
Outside the U.S., countries are already allocating money toward infrastructure projects. For instance, Japan has invested $100 billion for roads, bridges, railways and other building projects in Asia. China has already stated it will put billions into a so-called Silk Road infrastructure project to connect Asian economies.
“However, after a few months of choppy, sideways price action, IGF last week broke lower. The stock on Thursday gapped below its 126-day moving average (a trendline that roughly corresponds with half a year’s worth of trading days), which had previously cushioned the fund’s drawdowns in late October and late November. Additionally, IGF gave up the $45 level in the process, after this area previously marked a floor through the bulk of the second half of 2017,” according to Schaeffer’s Investment Research.
The American Society of Civil Engineers calculated that the U.S. will fall $1.44 trillion short of the $3.32 trillion required to invest in infrastructure through 2025.
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.
For now, IGF resides around critical technical levels.
“IGF $45 is not a random price point, but a level that carries some real significance. Back in 2014, the ETF peaked just shy of here, at $44.87, before embarking on a lengthy slide into its January 2016 low around $32.50,” said Schaeffer’s. “Years prior, IGF had found support around $45 for a few months in early 2008, ahead of a steep sell-off that would culminate in a low of $20.52 in March 2009 (coincident with the broad market’s bottom that same month). And meanwhile, for this final week of 2017, IGF’s round 20% year-to-date return is located squarely at $44.90.”
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