Plenty of sector and industry exchange traded funds have been adversely affected by presidential election year rhetoric. Biotechnology ETFs have, until recently, been hampered by harsh commentary on drug prices from Democratic nominee Hillary Clinton.
Conversely, it is believed aerospace and defense stocks and ETFs can continue climbing regardless of a Clinton or Donald Trump victory. Both Democratic and Republic presidential front runners may disagree on many hot-button subjects but the two agree on the need to upgrade the our country’s aging infrastructure. Investors can capitalize on the potential increased government backing in the sector with infrastructure-related exchange traded funds.
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The Guggenheim High Income Infrastructure ETF (NYSEArca: GHII), which is composed of the 50 highest-dividend-paying global infrastructure companies, has been outperforming other infrastructure sector-related ETFs. GHII’s recent outperformance may be attributed to its asset category allocations. Specifically, the infrastructure ETF is the only one of six ETFs in Morningstar’s Infrastructure category that has a mid-cap value tilt.
“As a country, we get a D on the American Society of Civil Engineers’ broad score card for infrastructure, across roads, bridges, airports, waste water, parks. We would have to spend well north of a trillion dollars just to get us to a B. U.S. infrastructure was installed between the 1950s and the 1970s; we’ve underinvested as a country since then. Public investment is 20% below its 60-year trend,” said CSFB analyst Jamie Cook in an interview with Barron’s.
The American Society of Civil Engineers estimated that $3.32 trillion in infrastructure investments will be required between 2016 and 2025. Infrastructure financing is among the major issues for current presidential candidates. Clinton has proposed $275 billion in infrastructure spending while Trump’s proposal is even larger.
Other infrastructure ETFs include the ProShares DJ Brookfield Global Infrastructure ETF (NYSEArca: TOLZ), FlexShares STOXX Global Broad Infrastructure Index Fund (NYSEArca: NFRA) and the SPDR FTSE/Macquarie Global Infrastructure (NYSEArca: GII).
Regarding infrastructure stocks, Cook told Barron’s “We are still broadly overweight the group for 2017, which will be a transition year. Earnings could be up modestly for the group because of the restructuring companies have undergone, and as excess heavy equipment inventory leaves the channel.”
For more information on the infrastructure sector, visit our infrastructure category.
Guggenheim High Income Infrastructure ETF
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.
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