Investments That Could Benefit From Biden’s Infrastructure Plan
By: Stacey Nickens
Last week, President Joe Biden revealed his American Jobs Plan. This plan would invest over $2 trillion into American infrastructure projects, including improving highways and modernizing state and federal facilities, amongst other goals. While the plan still needs to pass Congress, many analysts believe some portion of this infrastructure bill could pass before the end of 2021. Accordingly, the industrial sector of the market has been performing strongly, and now could be a good time to increase your exposure to companies that could benefit from this infrastructure plan.
Global U.S. Infrastructure Development ETF (PAVE) could offer you such sector exposure. This ETF holds many companies that will likely supply the materials, tools, and services to build-out this nation’s infrastructure. The ETFs top three holdings are Deere, Parker-Hannifin Corp., and Eaton Corp. Deere’s Construction and Forestry Segment, whose functions include road building and earth moving, could be tapped for some of these infrastructure projects. Similarly, Parker-Hannifin Corp. provides systems and solutions for removing water, air, fuel, oil, and other liquids during a construction project. Finally, Eaton Corp. is a power management giant. Analysts expect the company to provide a significant portion of the electrical components of the infrastructure plan. Overall, the PAVE ETF could increase your portfolio’s industrial weighting and allow you to benefit from how your tax dollars are being spent.
The iShares U.S. Infrastructure ETF (IFRA) could offer similar benefits. When selecting investments, it can be prudent to look at where the money is going. You likely want to invest in companies who are experiencing strong demand for their products and/or services, and similarly, you likely want to invest in ETFs that are experiencing strong fund flows. In just three months, the IFRA ETF has seen inflows worth $218 million, and such growth could continue throughout 2021 if market volatility picks back up. IFRA exposes investors to four key sub-sectors: utilities, industrials, materials, and energy. A bulk of the ETF’s holdings are in utilities, and when market volatility ramps up, the defensive sub-sectors tend to outperform. As a defensive sub-sector, utilities could perform strongly if such events as US-China tensions or slow vaccine administration increase stock market volatility. When such occurs, your positions in the IFRA ETF could benefit. Finally, dividend focused investors may be interested to know that the IFRA ETF offers a trailing dividend yield of 1.47%.