President Trump is making his ambitious infrastructure effort a centerpiece of his 2018 agenda. That theme could benefit some exchange traded funds, including the Global X U.S. Infrastructure Development ETF (Cboe: PAVE).
The Global X U.S. Infrastructure Development ETF, which is about 10 months old, tries to reflect the performance of the Indxx U.S. Infrastructure Development Index, which is comprised of companies focused on domestic infrastructure development, including those involved in construction and engineering; production of infrastructure raw materials, composites and products; industrial transportation; and producers/distributors of heavy construction equipment.
Additionally, the underlying index applies a proprietary analysis to focus on companies that provide the most exposure to increased investment in U.S. infrastructure. The underlying index also screens companies based on revenue exposure and primary business operations.
PAVE “has posted a strong performance and attracted four consecutive weeks of inflows since the middle of December, its best-ever run. Its assets have grown 18 percent to $35 million in just the first few trading days of the year,” reports Bloomberg.
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.
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.
PAVE “outperformed the broader market in the second half of 2017, posting a 20 percent return since August compared to 11 percent for the S&P 500, as the political rhetoric veered away from health care and focused back on tax reform and infrastructure spending,” according to Bloomberg.
The ETF hit a record high Monday and is up 3.3% to start 2018.
For more information on the infrastructure sector, visit our infrastructure category.