The Global X U.S. Infrastructure Development ETF (PAVE) is higher by more than 3% over the past month and there are good reasons behind that move, not the least of which is the requisite election-year push for infrastructure spending.
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.
Some market observers believe riskier assets aren’t adequately reflecting the shortening odds of former Vice President Joe Biden defeating President Trump in November. Others assert a Biden victory won’t be as bad for stocks as investors may currently believe. However, Trump may still have some say when it comes to infrastructure.
“The Trump administration proposed a $1.5 trillion infrastructure bill to bolster the American economy,” according to Global X. “The bill lays out plans to spend $300 billion to build and fix roads and bridges; $100 billion for low-income schools; and $100 billion for transit and telecommunication in rural regions.”
PAVE And Politics
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.
Data confirm Trump’s infrastructure proclamation was impactful.
“The news sparked U.S infrastructure stocks to jump, with U.S concrete shares to marking a 22.5% increase week over week, and also ignited hopes of bringing manufacturing back to the United States,” notes Global X.
The proposed infrastructure spending plans could extend the law authorizing highway and other surface transportation funding. Under the current law, or the FAST Act, an authorized $305 billion was spent over five years and is set to expire on September 30.
“Though it’s possible this particular bill could materialize in the not-too-distant future, how the administration plans to finance such an ambitious project remains to be seen. Adding to the uncertainty is that financing for the administration’s $2 trillion infrastructure plan from April 2019 has yet to be hashed out,” according to Global X.
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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.