“Infrastructure Week” has become a Washington punchline over the past four years. It’s a reference to smart policy that could likely have bipartisan support if it were ever made reality, except that time and again Washington political chaos gets in the way.
But if Democrat Joe Biden wins the White House in November, the country could be in for an “Infrastructure Term”, analysts think.
And there are actionable ideas investors can take advantage of now, and exchange-traded funds they can buy if they expect a Biden victory, on the belief that he will prioritize policies for modernizing the country’s existing road, rail, airports, electricity, water, sewage, communication systems and other infrastructure.
“Whether or not we get a ‘Blue Wave’” – that is, Democratic control of both Congress and the White House – “we will probably get some sort of infrastructure bill,” said Will Geisdorf, senior research analyst with Sarasota, Florida-based Allegiant Private Advisors. “The other area we’re watching is clean energy. Even without support from a Democratic Senate I think clean energy could benefit a lot. Just like Trump did a lot through executive orders, Biden could do the same.”
There are several infrastructure ETFs on the market, but one that’s a favorite of Geisdorf and other analysts is the Global X U.S. Infrastructure Development ETF, /zigman2/quotes/200238288/composite PAVE -1.58% which sports the catchy ticker PAVE.
The largest ETF in the category is the iShares Global Infrastructure ETF, /zigman2/quotes/203179113/composite IGF -0.67% said Todd Rosenbluth, head of mutual fund and ETF research for CFRA. But it and others have substantial holdings from outside the U.S. that wouldn’t get as much of a bump from a change in leadership in the White House. Rosenbluth also likes PAVE, noting that its holdings are “mostly industrials with a little bit of materials.”
In clean energy, Geisdorf likes the iShares Global Clean Energy ETF /zigman2/quotes/205740995/composite ICLN +4.41% , a fund that’s tracked Biden’s fortunes in the polls relatively closely over the past year. “It’s perked up again in the past few weeks,” as Biden’s lead over President Donald Trump seems to have solidified, Geisdorf said in an interview. That said, “It’s run up quite a bit so you may not see as much follow-through there. There might be more upside potential for infrastructure than clean energy.”
In fact, clean-energy ETFs have been on fire this year. The iShares product is up 78% for the year to date, about the same as two of Rosenbluth’s picks, the SPDR S&P Kensho Clean Power ETF /zigman2/quotes/206089699/composite CNRG +4.49% and the ALPS Clean Energy ETF /zigman2/quotes/204291195/composite ACES +2.90% which he notes has a nice mixture of sectors among its holdings, from electric automakers like Tesla Inc. /zigman2/quotes/203558040/composite TSLA -0.64% to utilities like NextEra Energy Inc /zigman2/quotes/200558509/composite NEE -0.40% . “These broadly diversified funds that have solar and wind and hydro power are good plays,” Rosenbluth told MarketWatch.
The big success story in the field is the Invesco Solar ETF, which is up a whopping 140% so far this year. Still, Rosenbluth said, “We like it. We think the underlying stocks have strong fundamentals and there’s room for that ETF to climb higher. A change in leadership would help.”
There’s less consensus on another popular narrative about a Biden presidency, the idea that a big fiscal stimulus bill will cause “reflation” – economic growth coupled with big borrowing to get it done, which makes bond yields rise.
“Value tends to outperform in an inflationary environment,” Geisdorf said. To make that bet, he suggests iShares Core S&P US Value ETF. /zigman2/quotes/203525188/composite IUSV -0.65%
That’s preferable to a more focused bet on certain aspects of the reflation trade, he thinks. In a reflationary environment, bond yields overall creep up and the yield curve – the difference between shorter-duration yields and those with longer maturities – widens, a positive for banks and other lenders.
For now, Rosenbluth thinks investors might be safer sticking with “growthier” securities.