The White House is already mulling another stimulus package aimed at bolstering the U.S. economy hampered by the coronavirus. This time around, the effort is expected to massive infrastructure spending, a theme that could benefit ETFs, such as the FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA).
NFRA tries to reflect the performance of the STOXX Global Broad Infrastructure Index, which identifies equities that derive the majority of revenue from infrastructure business, providing exposure to not only infrastructure sectors, but non-traditional ones as well.
President Trump is pitching a bold infrastructure initiative with a whopping $2 trillion price, double what he pledged to spend on infrastructure on the 2016 campaign trail.
“With interest rates for the United States being at ZERO, this is the time to do our decades long awaited Infrastructure Bill,” Trump tweeted. “It should be VERY BIG & BOLD, Two Trillion Dollars, and be focused solely on jobs and rebuilding the once great infrastructure of our Country! Phase 4.”
NFRA’s Time to Shine
NFRA’s index focuses on long-lived assets in industries with very high barriers to entry, with at least 50% of their revenue from key sectors with a 3-month average daily trending volume of at least $1 million. The portfolio is weighted based on a free-float market cap with certain constraints to limit exposure in any one security, sub-sector, or country. Additionally, the fund is rebalanced annually.
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 package should be going toward infrastructure.
Infrastructure is a rare bipartisan issue, but it has a history of dying in Congress. With the COVID-19 pandemic sapping the economy, perhaps this time will be different.
“But a string of proposals – critics often mock the White House for declaring ‘infrastructure week’ events – have languished in Congress, as lawmakers argued about what kinds of projects should be included and how they should be financed,” reports USA Today.
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.
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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.