The FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA) is an example of an exchange traded fund that should benefit regardless of what happens on Election Day. Both President Trump and former Vice President Joe Biden have ambitious infrastructure plans.
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. Investors considering NFRA or any other infrastructure asset are betting this time will be different when it comes to policy execution and implementation.
“Both candidates have advocated for greater infrastructure spending,” writes Morningstar analyst David Sekera. “Considering that infrastructure spending has a high economic multiplier effect and leads to new jobs, which would be especially helpful during this time of high unemployment, it is more likely than not that a deal will get done no matter who wins the election.”
NFRA Electoral Implications
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.
“Under a Trump administration, we expect that infrastructure spending would be concentrated on more traditional projects like highways, bridges, and mass transportation,” notes Sekera.
Candidate and former vice president Joe Biden proposed spending $2 trillion within the next four years for clean energy development, as well as rebuilding the nation’s infrastructure.
How infrastructure dollars are spent is equally as important as knowing those dollars are earmarked for infrastructure in the first place. During the 2016 presidential campaign, Trump promised to spend $1 trillion to shore up America’s sagging infrastructure, but politicians have clearly agreed to exceed that number. That promise is likely to be reiterated on the campaign trail this year.
One issue to consider is that President Obama’s infrastructure effort, one unveiled while Biden was Vice President, largely fell flat.
“Under a Biden administration, we expect that infrastructure spending would also include energy-efficiency and clean-energy projects. For example, funding could be granted to retrofit commercial properties to improve energy efficiency,” according to Sekera.
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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.
