Key Takeaways
- A recently announced $1.2 trillion bipartisan infrastructure plan would make historic investments toward revitalizing and rehabilitating U.S. infrastructure.
- Companies tied to infrastructure spending — both owners of assets such as utilities and railroads, and infrastructural enablers such as construction and materials companies — would be potential beneficiaries.
- Urbanization-themed megatrend ETFs can help investors own a long-term stake in the future of U.S. infrastructure.
A bipartisan spending agreement reached last month could help modernize U.S. infrastructure by funding work to upgrade roads, clean energy, and even high-speed internet.1 The plan outlines spending at a historic scale, including the largest investment in bridges since the interstate highway system and the largest-ever investment in clean drinking water.2
For long-term investors, the agreement could signal a growth opportunity. Megatrend exchange traded funds (ETFs) that focus on domestic infrastructure can help capture shares of companies that are poised to benefit in a diversified, affordable way.
How the $579 billion in new funding will be spent
Source: White House fact sheet, as of June 24, 2021.
A potential turning point for U.S. infrastructure
The $1.2 trillion proposal includes $579 billion in new spending over the next eight years, which would put annualized investment in U.S. infrastructure near $150 billion per year — more than double the $63 billion spent on U.S. infrastructure in 2020.3
Outlays for spending come as experts say that U.S. infrastructure is in dire need of rehabilitation. The American Society of Civil Engineers recently gave U.S. infrastructure a C- grade in their annual report card.4 The unfunded public infrastructure gap has grown to $2.1 trillion.5 Growing wear and tear has made critical infrastructure fragile — 43% of public roadways are in poor or mediocre condition.4
Beyond physical infrastructure, the agreement outlines investments focused on broadband and electric vehicle charging that will help build the next generation of U.S. information and power generation.
Breaking down the infrastructure value chain
NYSE FactSet U.S. Infrastructure Index
For illustrative use only.
Consider megatrends ETFs
Investors looking for targeted exposure to U.S. infrastructure companies might consider equity index-tracking ETFs that include both infrastructure owners operators and enablers, rather than one or the other. A multifaceted approach gives investors exposure to projects as varied as adding thousands of miles of new power transmission lines and upgrading transit and rail networks across the country.
We call this megatrend investing because, even when a big-picture investment theme such as U.S. infrastructure feels positioned for growth, it can be hard to pinpoint which individual companies or industries will thrive over the long haul.
Index-tracking megatrend ETFs, such as U.S. infrastructure funds, can help capture the potential of the theme investors have identified, while still diversifying across the many, and often complex, industries and companies that are poised to potentially benefit from growth in the theme.
