President Trump’s to rejuvenate an economy saddled with coronavirus issues could include a $2 trillion infrastructure plan, assuming Congress gets on board, and that could be a boon for ETFs, such as the AGFiQ Global Infrastructure ETF (GLIF).
The AGFiQ Global Infrastructure ETF uses a multi-factor investment process to seek long-term capital appreciation by investing primarily in global equity securities in the infrastructure industry. President Trump is pitching a 10-year, $1 trillion infrastructure plan, which is scaled back from his 2016 campaign trail plan.
“Trump has been promising such a program his entire presidency, but let’s hope the pandemic will be the catalyst to deliver,” writes Noah Smith for Bloomberg. “The numbers Trump is mooting for infrastructure spending — $2 trillion, equivalent to the entire recent stimulus bill — are reassuringly large.”
The strong, consistent demand for infrastructure has delivered stable, repeatable cash flows to investors. Meanwhile, population growth, aging infrastructure, and constrained government budgets are creating opportunities for the private sector. The high cost of entering the infrastructure business also limits competition or provides a wide economic moat for those already in the field.
GLIF Could Glitter
“While the government waits to make its infrastructure push, it can plan what to spend the money on,” according to Smith. “A typical criticism of infrastructure as a stimulus program is that there aren’t many shovel-ready projects. But the months of shutdown give government plenty of time to get a head start on the planning and approval processes.”
The infrastructure category has also historically offered higher dividend yields than global fixed-income and global equities, along with greater predictability of long-term cash flows. The ETF may be able to capture the growing demands of economic development that are driving more funding into transport, power, and other systems.
“A bipartisan group of 20 members of Congress wrote House leadership urging them to pass an infrastructure spending bill. This is also good, as infrastructure spending not only can provide the immediate economic stimulus but also provides a foundation for further economic development down the road,” according to The Hill.
What could really bolster the case for GLIF is a change in infrastructure funding.
“Instead, the government needs to spend directly to fund infrastructure. The federal government should foot the bill — as Trump notes, borrowing costs are at historic lows — but much of the actual spending decisions can be made by state governments,” according to Smith. “These governments understand their infrastructure needs well and they’re facing severe budget crunches. Thus, the goal should be federal grants for direct state government spending on infrastructure.”
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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.
