By Michael Brush, MarketWatch
Given the amped-up level of political rancor, it might seem like President Trump’s $1 trillion infrastructure spending plan announced Tuesday is dead on arrival. After all, Democrats could be wary of allowing him credit for a big spending plan right ahead of the elections.
This would be the wrong conclusion.
Some variation on Trump’s spending proposal stands a good chance of getting into law soon, for the reasons below. If approved, it would boost the prospects of the 30 stocks and ETFs that my fund manager infrastructure Sherpas single out below.
First, three reasons why a wide-ranging infrastructure-spending plan may finally get approved:
Reason 1. If Democrats foot-drag on Trump’s proposal, they might be accused of obstructionism, says Brian Sponheimer, an infrastructure analyst who helps manage the Gabelli Asset Fund /zigman2/quotes/205684455/realtime GABAX -0.26% . That would make them look bad because more than a few people have noticed we need to spend more on roads and bridges, and communications and electrical-grid upgrades. A smaller federal infrastructure spending plan now in place expires in September.
Reason 2. At a time when politicians are looking for ways to spend to get us out of the Covid-19 lockdown recession, infrastructure seems like a handy way to go.
“If infrastructure is part of the general fiscal stimulus plan, that makes it more palatable,” says Sponheimer. Treasury Secretary Steven Mnuchin has said all along that infrastructure spending will be part of phase four of Covid-19 stimulus, and it looks like that may be the case.
U.S. unemployment levels have soared.
“Adding jobs to long-duration projects in the recovery phase makes sense,” says Stifel infrastructure analyst Stanley Elliott. The Portland Cement Association says $1 billion in infrastructure spending creates upward of 40,000 jobs, Elliott notes.
“We spend so much money on other countries, and they don’t appreciate it,” says Trump. “We are going to spend money on our own country; it is going to be our jobs, our equipment.”
Reason 3. There’s more bipartisan support now because a lot of Democratic governors are getting antsy about recession-induced tax revenue shortfalls crimping their own infrastructure spending programs, points out Eric Marshall of Hodges Capital Management.
“A lot of the Democratic governors are asking for relief,” he says. “If coronavirus did not happen, there probably would not be a highway bill before the election. Now there is a chance something might get done here.”
The pressure is on because the federal Fixing America’s Surface Transportation (FAST) Act infrastructure spending law expires Sept. 30.
We see bipartisan support for action to fill the gap in the following measures in the works. The House Committee on Transportation and Infrastructure is near the final stages of pushing out a spending plan that would allocate $494 billion over five years. A Senate plan would allocate $287 billion for highways over five years.
“These bills represent a 43% and 27% increase from prior spending levels on highways under the FAST Act,” says Elliott. “We remain increasingly encouraged by the news flow.”
Any infrastructure spending plan would support continued strength in broader indices like the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.28% and the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.42% , but it would be especially good for infrastructure stocks. Here’s a quick roundup of names to consider.