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Will Infrastructure ETFs Get a Boost from Trump's Plan?


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The promise was for a $1-trillion infrastructure plan from Trump's campaign days but the actual plan launched lately is a $200-billion federal infrastructure plan, which comprises below-mentioned areas:

1.    $100 billion in matching grant would go to states and cities on new, less-generous terms (more on this later) .

2.    $50 billion rural block grant program that will be available to states based on the length of rural roads and the level of rural inhabitants.

3.    Around $20 billion for "projects of national significance" meaning "projects that can lift the American spirit, that are the next-century-type of infrastructure as opposed to just rebuilding what we have currently."

4.    Additional "$20 billion in fund would go to federal loan programs that underwrite private financing of profitable infrastructure projects."

5.    Plus, there's a $10-billion capital financing program that would finance the construction of federal office buildings and similar infrastructure for actual government use.

Per an article published on VOX.com, "federally funded highways are financed on the basis of an 80-20 federal-state split." Trump's proposal is to reverse the 80-20 formula and call for states and cities to dole out at least $4 for every $1 in federal money they get. Some experts believe that the current formula results in "over-investment in new highway projects with little transportation value." 

The overall plan is supposed to lure private companies to come up of the groundwork and reconstruct America to the extent of $1.5 trillion over the coming 10 years . However, sources believe that private investors are less likely to be drawn to this project.

Investors should also note that the Trump administration did not roll out a separate infrastructure proposal, rather it came with a budget package "that would also cut $48 billion in federal funding for other programs and services."

The vox.com article indicated that Republican administrations are known for proposing big initiatives that are intended to be funded by increasing budget deficits. George W. Bush's 2001 tax cuts, 2003 tax cuts and Medicare expansion as well as Trump's 2017 tax cuts and his big increase in military spending have been held as examples for this Republican tendency by vox.com.

Any Bright Side?

There is an initiative that would save $ 350 billion for drinking water pipes to guarantee that there is no another Flint, Michigan-style water crisis in the coming few years. This single initiative grossed more federal funds than the entire infrastructure plan. So, water ETFs like PowerShares Water Resources PHO and First Trust ISE Water Index Fund FIW should benefit from this plan.

As long as infrastructure ETFs are concerned, there are less likely to get a boost as financing would be a big issue. Still, investors can keep a tab on funds like Global X U.S. Infrastructure Development ETF PAVE , ProShares DJ Brookfield Global Infrastructure ETF TOLZ and SPDR S&P Global Infrastructure ETF GII (see all Utilities/Infrastructure ETFs here).

Transportation ETFs like iShares Transportation Average ETF IYT and SPDR S&P Transportation ETF XTN should also be closely watched (read: ETFs to Watch on Solid FedEx Results ).

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FT-ISE WATER IX (FIW): ETF Research Reports

PWRSH-WATER RES (PHO): ETF Research Reports

ISHARS-TRAN AVG (IYT): ETF Research Reports

SPDR-F/M GI100 (GII): ETF Research Reports

PRO-DJ BF GB IF (TOLZ): ETF Research Reports

SPDR-SP TRANSPT (XTN): ETF Research Reports

GLBL-X US INFR (PAVE): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , ETFs
Referenced Symbols: FIW , PHO , IYT , GII , TOLZ



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