Election Day is just four months away and that has politicians making infrastructure promises. Whether those promises are made on is another matter, but the talk could be enough to benefit exchange traded funds 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. Indeed, costs play a role in determining the fate of domestic infrastructure efforts.
Democrats recently proposed the Invest in America Act, which calls for $494 billion in infrastructure spending.
“The bulk of our nation’s infrastructure – our roads, bridges, public transit and rail systems, the things that hundreds of millions of American families and businesses rely on every single day – is not only badly outdated, in many places it’s downright dangerous and holding our economy back,” said Rep. Peter DeFazio (D-OR).
With the White House looking to unleash a massive wave of stimulus onto the U.S. economy and in an effort save jobs numbers from sliding, infrastructure could be in style as the coronavirus situation, hopefully, eases soon. Some data points confirm that some of the stimulus packages should be going toward infrastructure.
“319bn would be spent on roads, including the repair of 47,000 structurally deficient bridges, th eeasing congestion and the reduction of carbon emissions,” according to Global Construction Review. “$105bn on mass transit, including new routes and more reliable services.”
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.
“Yet for decades, Congress has repeatedly ignored the calls for an overhaul and instead simply poured money into short-term patches. The result? We’re still running our economy on an inefficient, 1950s-era system,” said DeFazio.
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.
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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.