In the aftermath of Hurricane Harvey and Hurricane Irma, infrastructure ETFs, including the SPDR S&P Homebuilders ETF (NYSEArca: XHB), iShares U.S. Home Construction ETF (BATS: ITB), and the Materials Select Sector SPDR Fund (NYSEArca: XLB), have been bullish.
Widespread devastation across Texas, the Caribbean and Florida has affected millions of people in the midst of the rare Category 4 and Category 5 hurricanes, Harvey and Irma. In Florida, Irma has left millions without power after the deluge turned streets into rivers.
Unfortunately, the damage is not done yet. Hurricane Irma is still traveling through Florida and is making its way to Georgia. It will take months for the communities hit by these two storms to rebuild entirely.
According to JP Morgan analysts, the combined costs of damages and infrastructure repair of the two hurricanes will reach a record-breaking estimated $260 billion.
As communities begin to rebuild in the coming months, demand in the infrastructure and construction markets will see positive trends. This means growth within infrastructure ETFs is to be expected.
XHB, which tracks the performance of the S&P Homebuilders Select Industry Index, is up 15% year-to-date. As people head to stores like Lowe’s and Home Depot, companies covered in this ETF, its value will likely see positive results as demand for building materials increases, says Thomson Reuters.
Meanwhile, ITB and XLB, which are up 26% and 11% year-to-date, respectively, will likely follow the same positive outlook.
“First Harvey, and now Irma should shower gains on infrastructure stocks as re-building will push up their demand. So, companies dealing in building materials should see a surge,” reports Zacks Investment Research. “The two storms are likely to create a greater need to rebuild infrastructure such as homes, office, roads, bridges and many others propelling demand for all types of home improvement equipment. As such, ETFs that focus on these industries are poised to benefit in the coming days.”
For more information on the infrastructure ETF sector, visit our infrastructure category.