Infrastructure shines amid inflation and supportive policies


  • Many infrastructure stocks are proving resilient to inflation due to their value characteristics, inflation-adjusted contracts, and fixed interest rate debt, as has been the case historically. They could also stand to benefit from reshoring efforts amid global supply chain disruptions, garnering new investment and greater usage.
  • Infrastructure public equities should benefit from public sector spending. In the U.S., the Infrastructure Investment and Jobs Act (IIJA) is directing $1.2 trillion in government spending to rebuild and enhance U.S. infrastructure. At the same time, global infrastructure spending is accelerating as countries grapple with supply chain pressures, look to stimulate economic activity, and adapt to climate change.
  • We believe investors can capitalize on infrastructure opportunities by investing in both infrastructure enablers (companies that generate revenue from construction products and services) and infrastructure asset owners (companies that generate revenue by operating infrastructure, like utilities and ports).

Interest rates are rising to manage inflation, we are experiencing a regime shift in equity markets, and supply chains are unprecedently strained. Yet, this does not mean there are no Megatrend opportunities available to investors. In fact, moments of permanent change can often spark periods of exponential growth — for infrastructure, that moment could be now.


Infrastructure stocks may prove resilient amid high inflation and rising rates. They tend to hail from value-oriented sectors like utilities, industrials, and materials, where valuations are driven primarily by near-term cash flows rather than long-term growth expectations. Many infrastructure asset owners have additional lines of defense against inflation, including: 1) 10- to 20-year contracts that reset their pricing in parallel with changes in inflation; 2) long-term fixed interest rate debt that erodes in relative cost as inflation rises (i.e. their interest payments remain the same, even as the dollar loses its value); and 3) a tendency to pay large dividend payments — dividends often increase during inflationary periods.1 Because of these features, infrastructure stocks have historically performed well in inflationary environments like the one we find ourselves in today.

Global infrastructure stocks historically outperformed the broader market and other asset classes in inflationary environments

Column chart of average of annualized returns during periods of high inflation for global infrastructure stocks, global stocks, global IG bonds, and global real estate.

Note: Past performance is not indicative of future results. You cannot invest directly in an unmanaged index. High inflation periods are when monthly year-over-year U.S. CPI  > 2.5% . Returns represent the avg. of annualized returns across these periods (using end of month values), excluding periods < 3 months.


Source: Asset classes represented by S&P (Global Infrastructure: S&P Global Infrastructure Total Return Index), MSCI (Global Stocks: MSCI ACWI Net Total Return; Global Real Estate: MSCI World Real Estate Net Total Return Index), Bloomberg (Global IG Bonds: Bloomberg Global Aggregate Index); Bloomberg data as of 5/31/22 (monthly data since 2/2007).

Chart description: Column chart of average of annualized returns during periods of high inflation for global infrastructure stocks, global stocks, global IG bonds, and global real estate. The chart shows how global infrastructure stocks historically outperformed the broad market and other asset classes during periods of high inflation, on average.


Beyond infrastructure’s near-term resilience, there are several tailwinds that appear supportive of long-term growth. Global supply chains are re-orienting against unprecedented change — input shortages, logistical bottlenecks, and geopolitical crises are challenging the world’s multi-decade reliance on globalization. At the end of 2021, 90% of firms surveyed by McKinsey said they would re-orient towards regionalization in the next three years.2 Building new infrastructure, whether funded through government policies or private investment, can facilitate and accelerate these efforts. Improving roads, airports, seaports and waterways is essential to ensuring seamless supply chains, reshoring and an amelioration of today’s pressures. We believe key segments across the infrastructure value chain are well-positioned to benefit from projects of this variety, including both infrastructure enablers and asset owners.


Last November, President Biden signed the Infrastructure Investment and Jobs Act into law, cementing the single largest infrastructure investment in U.S. history, allocating $1.2 trillion of spending (including $550 billion of new spending) over the next decade.

The IIJA will invest $550 billion of new spending across most facets of U.S. infrastructure

Bar chart showing new spending in billions from the IIJA, across various facets of U.S. infrastructure.

Source: U.S. Congress, November 2021.

Chart description: Bar chart showing new spending in billions from the IIJA, across various facets of U.S. infrastructure. The chart shows that many billions of dollars will be invested across most facets of U.S. infrastructure.

In the short time since the infrastructure bill’s enactment, the federal government awarded, announced, or initiated funding processes for over $110 billion of spending across 4,300+ projects.3 This includes:

Transportation: $52.7 billion for highways, $20.5 billion for public transit, $5.3 billion for bridges, and $14 billion for ports and waterways.

Power infrastructure and clean technologies: $3.2 billion for energy efficient homes, $3 billion for advanced batteries, $4.8 billion for power grids, $20 billion for clean energy and $9.5 billion for clean hydrogen.

Water infrastructure and environment: $8 billion to improve pipes and drive cleaner, more efficient water distribution.

Digital infrastructure and resilience: $45 billion Internet for All Initiative, opening a wide range of funding opportunities, including applications to access $3.2 billion for rural broadband deployment.


We expect immediate spending from the infrastructure bill to translate to near-term revenue increases for enablers as they provide the products and services that comprise infrastructure projects, from raw materials all the way to project development. U.S.-based companies are particularly well positioned given the bill’s “Build America, Buy America” provisions. The White House recently issued guidance to this end, outlining new standards to “ensure that federally funded infrastructure projects use American-made [materials and products].”4


Over the medium-term, we expect U.S. infrastructure asset owners to enjoy freed-up capital from government-funded improvements that should reduce initial and ongoing capital expenditure needs and improve margins. We also anticipate that these companies will experience service improvements that should expand their overall markets and revenues. Rail operators, for example, should benefit from expanded and faster routes, while electric and water utilities should benefit from safer and more reliable service.


And long-term, we expect U.S. infrastructure enablers and owners to benefit from continued spending and resulting infrastructure improvements. Infrastructure spending is not a one-off investment — it will take more than a decade for the government to fully disperse the infrastructure bill’s funds, with the Act’s final dollars being spent after 2031.


For developed market countries, expanding and revitalizing infrastructure is essential to remaining competitive and raising the ceiling of productivity at the national level. Take the development of the Channel Tunnel that links the United Kingdom to France. Prior to its completion in 1994, trade and tourism between the U.K. and the rest of Europe were subject to logistical challenges and speed limitations. Over two decades later, more than 20 million passengers and $187 billion of trade travel through the tunnel by car and train every year.5


Infrastructure development is also a fundamental part of modernizing emerging market (EM) economies. China, for example, spent generously on public infrastructure from 1992 to 2011, averaging 8.5% of annual GDP and helping to catalyze the country’s tremendous growth.6 Over that same period, China’s GDP grew at an average annual rate of 17% and, in 2021, was estimated to be 14 times greater than at the turn of the millennium.7,8 China’s infrastructure boasts some of the fastest rail, most efficient ports, and largest airports in the world.

EM infrastructure spending could exceed $65 trillion over the next two decades

Column chart showing total estimated infrastructure spending across emerging market regions from 2021 to 2040.

Source: Swiss Re Institute estimates using data from G20 & Oxford Economics, 2020.

Chart description: Column chart showing total estimated infrastructure spending across emerging market regions from 2021 to 2040. The chart shows that $65 trillion could be invested across all regions, with emerging Asia receiving the most investment.

The same story is beginning to unfold in emerging markets more broadly. Supply chains are diversifying away from significant reliance on China as demands for greater resiliency mount. In fact, at current rates, global infrastructure assets may garner as much as $130 trillion of investment over the next five years.9 This is in no small part driven by local investment to capture opportunities in “near-shoring” to broader Asia, Latin America and Eastern Europe. And established economies are explicitly helping. The European Union announced its Global Gateway initiative, which seeks to direct $320 billion to transport, clean energy, and other infrastructure projects of partner countries.10


Investors looking for exposure to infrastructure via public equities may want to consider looking at ETFs invested in companies that generate a majority of their revenues from infrastructure-related business activities, firms across both infrastructure enablers and asset owners.

Infrastructure enablers — Enablers are cyclical exposures, spanning companies involved in producing construction materials, products, and equipment, and providing construction/engineering services.

  • Construction Product/Equipment: Transportation (e.g., mixing/paving asphalt, highway components, rail/railcars, construction equipment), traditional and clean energy (e.g., electrical wiring, electric controls); water infrastructure (water pipes, pumps, filtration components); and digital infrastructure (cables and telecommunication structures).
  • Materials: Transportation (e.g., concrete, asphalt, steel); traditional and clean energy (e.g., copper, nickel, aluminum, and insulating plastics); as well as water (thermoplastic, concrete, chemicals used in distribution, storage).
  • Construction/Engineering Services: Transportation, power, clean energy, water and digital infrastructure.

Infrastructure asset owners — Asset owners are non-cyclical exposures involved in operating various facets of completed infrastructure, including water, electric, and gas utilities; railroad companies, and pipeline operators.


Inflation and supply chain disruption are top-of-mind for investors, making infrastructure a compelling port in the storm. After years of anticipation, and many months of debate, significant public sector funds are ramping up to support U.S. infrastructure in ways that could create meaningful investment opportunities for years to come. And global infrastructure development is a critical story over the next decade. Pure-play infrastructure ETFs have the potential to help investors navigate today’s turbulence, while capturing the structural growth opportunities of tomorrow.

Jeff Spiegel

Jeff Spiegel

Head of U.S. iShares Megatrend and International ETFs

Andrew Little

Megatrends Strategist


Mariah Ward

Megatrends Strategist