Joining the “ETF Report” with hosts Alexis Christoforous and Kristin Myerson, ETF Trends CEO Tom Lydon spoke to what investors should be expected following the recent infrastructure deal.
As far as what ETFs to look at for the investors looking to find exposure based on the infrastructure deal, Lydon points out the Global X Infrastructure And Development ETF (PAVE), the iShares Global Infrastructure ETF (IGF), the iShares U.S. Infrastructure ETF (IFRA), the FlexShares STOXX Global Broad Infrastructure ETF (NFRA), and the SPDR S&P Global Infrastructure ETF (GII).
Looking at all of these funds, Lydon explains that the winners may be the rails. In his recent speech, President Biden noted that there is a lot of support going for not only private rails but the public as well, which makes up nearly 10% of the bill. Those stocks tend to do the best. Global X, for example, has a big allocation in that space, which puts it in an excellent position.
Another big point revolves around the commodities discussion. There’s been an increase in the demand, and this infrastructure bill will put a lot of demand on commodities prices. Areas such as steel, energy, and copper will for sure be affected. With energy, areas like water and solar will be putting 5G into place. It is a lot of positive, but for investors looking for an energy commodities type ETF, the Invesco Optimum Yield ETF (PDBC) has 15 types of commodities to help assure growth.
“The winners in this infrastructure bill may be the rails,” @ETFtrends CEO @TomLydon says. “Global X $PAVE has a huge allocation to some big companies in that space. A couple, in particular, are Kansas City Southern, Union Pacific, CSX.” https://t.co/Jb7k9tf4PH pic.twitter.com/ySsgssBJio
— Yahoo Finance (@YahooFinance) June 24, 2021
In discussing where investors may be headed when considering where some people may be moving their money away from, Lydon notes, “We’re having a lot of pressure with the threat of rising interest rates and inflation, and the lack of clarity from The Fed.”
Really, the bond market, which was the big winner in ETF flows in 2020, has been seeing a fraction of that amount going in and coming out currently. People don’t enjoy the risk, especially compared to alternative income sources such as energy, let alone MLPs, which will benefit from this new infrastructure plan.
Focusing more on inflation and the best ways to hedge, Lydon points out how it used to be gold, but it’s currently sitting in the back, compared to other commodities. With that in mind, there hasn’t been inflation since the 70s, and there’s still a lot of speculation over what exactly is going to happen and whether or not a rise in prices will be a factor.
“The best thing you can do is rather than be scared of it, lean into it, and invest in those areas where you can actually profit or offset the prices you might see at the pump or the supermarket.”
For more market trends, visit ETF Trends.