Regardless of Interest Rates, Infrastructure Should Continue Its Upside

Amid high inflation, interest rates, and other macroeconomic unknowns, infrastructure should continue to be a priority play that could continue to show an upside. The Direxion Daily US Infrastructure Bull 2X Shares (DOZR) is up about 16% for the year already.

One of the catalysts for infrastructure continues to be the U.S. government’s willingness to open its wallet and fund more projects. The Environmental Protection Agency (EPA) is already pouring $1 billion in funds from the Bipartisan Infrastructure Law to finance cleanup efforts at 22 Superfund sites, according to a report by The Hill.

In short, this will allow the EPA to clean up contaminated sites. It’s a reminder that infrastructure is not only a matter of building things but improving what’s already available.

“We’ve known for decades the terrible damage that lead contamination does to communities, particularly children, and so I’m glad that we are at this moment,” said Senator Raphael Warnock (D-Ga.). “This cleanup will include investigating the extent of contamination, excavating and properly disposing of contaminated soil, and backfilling and restoring the property. This is a process that typically takes years to advance.”

“The infrastructure law, of course, was written with environmental justice in mind, the idea that no matter your ZIP code, you have a right to clean air, you have a right to clean water and a safe community to live in and raise your family,” said Rep. Kathy Castor (D-Fla.)

Leveraging the Infrastructure Trade

DOZR adds a double dose of risk or reward with twice the exposure to its index, the Indxx US Infrastructure Index (IUSINFI). The index is designed to track the performance of U.S.-listed securities, including ADRs, of companies that are involved in infrastructure through the engineering, design, maintenance, and construction of infrastructure projects.

Companies that derive a minimum of 50% of their total revenue from construction and engineering services or industrial transportation are eligible for inclusion in the index. The index provider screens companies based on various market capitalization and liquidity metrics and selects the top 100 securities by market capitalization.

DOZR has moved about its 50- and 200-day moving averages, potentially showing that more strength could be ahead. Additionally, momentum sits close to the middle of the overbought and oversold levels via the relative strength index (RSI) indicator, which also hints that more upside could come.

DOZR Chart

DOZR data by YCharts

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