“Investors have been waiting a long time for a generous, federally led infrastructure package,” said David Bianco, chief investment officer of the Americas for DWS. “Politicians have promised this for more than a decade. Something’s finally going to be done and it will be big.”
So it should come as no surprise that the infrastructure ETFs, which own many top industrial firms, are surging this year.
It’s clear that many investors are banking on a big push to rebuild traditional types of infrastructure: transportation networks, aging electric grids and water systems.
“The Biden administration and Congressional Democrats are looking to spend as a means to push the economy forward,” said Jim Baird, chief investment officer with Plante Moran Financial Advisors. “The beneficiaries could be wide reaching across the construction and commodities sectors.”
High tech could win big too
Manchin said Monday that “as the bill exists today, it needs to be changed.” He cited resistance to the Biden proposal for a hike in the corporate tax rate from 21% to 28%. Manchin suggested he’d be willing to compromise and would agree to a 25% rate.
Donald Calcagni, chief investment officer with Mercer Advisors, told CNN Business that he thinks Biden is “politically astute” enough to know how “the sausage gets made” in Washington, adding that “there will still be some horse trading.”
In other words, the president will probably be amenable to negotiating in order to get a deal done, which is why many investors are still betting that an infrastructure package will eventually be signed into law and are now focusing on companies in the green energy sector that could benefit from it.
“The big winners are going to be electric vehicles, charging stations and clean tech. You have to look at what’s good for the environment,” said Patrick Healey, founder and president at Caliber Financial Partners.
Biden’s plan is also likely to give a lift to companies that run cell phone towers, data centers and other high tech and telecom infrastructure, said Mercer’s Calcagni.
“I do like how this plan fundamentally broadens what is defined as infrastructure. If Covid-19 has taught us anything, we need more broadband access,” Calcagni said.
Take the long view
Still, much of this spending will roll out slowly over the next decade.
“This is going to be positive in the long run for tech firms, manufacturing companies and even municipal bond investors,” said Stephen Dover, chief market strategist and head of the Franklin Templeton Investment Institute.
“But this is not a shovel-ready plan. It’s not stimulus in the usual sense,” Dover said.
That isn’t necessarily a problem, however. Some experts are applauding
“This isn’t just about repairing what’s wrong now right away, but also managing for the next 30 to 50 years,” said Christophe Petit, co-founder and president with Star America Infrastructure Partners.
“We need more sustainable and innovative infrastructure,” he added. “This goes way beyond fixing roads and bridges,”