Infrastructure stocks within US-based exchange traded funds have surged in performance over the past month as President Donald Trump plans to invest in the sector.
Infrastructure ETFs have returned more than 11% over the past month – a sharp turnaround after negative returns of around minus 5% year to date and minus 34% over three years.
Despite poor returns over the medium term, performance has not put off investors, who have cumulatively invested more than $6 billion over three years.
Broader market investment
Part of the positive returns over the past few weeks can be attributed to investors’ expectations that the US government will start to work on its bridges, roads, airports, dams and other projects around the country. In mid-February, the White House unveiled a $1.5 trillion infrastructure plan, mostly funded by state and local governments.
The money is in need, as shown by the collapse of a pedestrian bridge in Florida in March, which killed six people. According to the American Society of Civil Engineers, $4.5 trillion is needed by 2025 to fix crumbling infrastructure – three times what the government has laid out.
Infrastructure to become key policy
But Morgan Stanley analysts reckon infrastructure will be a “main policy topic” for both Democrats and Republicans in this year’s mid-terms and foresees policy progress in 2019.
However, infrastructure makes up just over 10% of the bellwether US S&P 500 index, accounting for more than $4 trillion in market cap value, so positive inflows do not necessarily mean ETF investors have picked out infrastructure stocks but have rather invested in the broader market.
The main stocks in the US include Lockheed Martin, CSX and US Steel.
Infrastructure ETF options: at home and abroad
The $105 million Global X US Infrastructure Development ETF (PAVE) is up around 9% since launch in March last year.
For a global view on the sector, the $2.5 billion iShares Global Infrastructure ETF (IGF) is up 8.5% over three years – compared to minus 34% for US stocks – and close to 6% over the past 12 months. Both funds cost 0.47%.