With so much talk about infrastructure, whether it’s because 2020 is an election year or because the economy needs a boost, investors may want to revisit this investment concept. However, when it comes to U.S. infrastructure spending, the Global X U.S. Infrastructure Development ETF (PAVE) is the only ETF fully levered to that idea.
PAVE 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.
The infrastructure category has also historically offered higher dividend yields than global fixed-income and global equities, along with greater predictability of long-term cash flows. The ETF may be able to capture the growing demands of economic development that are driving more funding into transport, power, and other systems.
“When it comes to both investing and politics, perhaps there’s nothing more American than being tempted, then disappointed by infrastructure,” reports InvestorPlace. “What that means is that politicians from both parties frequently pay lip to service to increased spending on infrastructure, but they’re usually long on talk and short on action. Quick history lesson: the U.S. hasn’t passed a comprehensive infrastructure bill since the Eisenhower Administration.”
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 packages should be going toward 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.
With the economy scuffling in the wake of the coronavirus, politicians may finally take action on infrastructure, potentially boosting PAVE in the process.
“A $2.1 trillion boost of public infrastructure spending over a 10-year period, to the levels (relative to GDP) of the mid-20th century, could add as much as $5.7 trillion to the U.S. over the next decade creating 2.3 million jobs by 2024 as the work is being completed. The additional 0.3% boost to productivity per year that it generates will lead to a net 713,000 more jobs on the books by 2029,” according to S&P Global Ratings.
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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.