On Nov. 15, President Biden signed the$1 trillion bipartisan infrastructure billinto law. This bill will send a deluge of funds into the economy.
Some ETFs have seen returns boosted in anticipation of this government spending, while others could benefit from the long-term nature of this bill, as it provides support for these areas for years to come.
The bill will distribute the $1 trillion over 10 years, with the federal government sending funds directly to states for projects that fit the bill's criteria.That produces several different phases of spending, which affects when certain sectors will get their piece of spending.
Not all industrials alike
Industrials sector ETFs are an obvious way to play the bill. However, investors should be cautious about what's inside their industrial ETF, as GICS' definition for the sector includes commercial services like short-term employment offices and couriers.
The $工業指數ETF-SPDR(XLI.US)$has a 4.82% weighting toward $聯合包裹(UPS.US)$and a nearly 20% allocation to freight and logistics, while the $Fidelity MSCI Industrials Inde(FIDU.US)$has a 3.6% weighting to $聯合包裹(UPS.US)$and a 16.3% allocation to the freight subsector.
One ETF that offers a more focused take on this idea is the $Global X US Infrastructure Development ETF(PAVE.US)$. The fund's performance this year has waxed and waned with the congressional back-and-forth on the details of the spending bill.
Year-to-date, the ETF has gained 36.5%. Relative to some other infrastructure ETFs like the $iShares U.S. Infrastructure ETF(IFRA.US)$, PAVE has a focus on "hard" infrastructure like roads, bridges and transport.
The $First Trust RBA American Industrial Renaissance ETF(AIRR.US)$is another ETF that offers focused exposure to likely beneficiaries of this spending. More than 70% of the portfolio is allocated to companies in the construction and machinery subsectors. This makes it one of the purest ETF plays for the initial surge of spending from this bill.
Wave of spending for water
Similarly, U.S.-focused water ETFs are likely to see support going forward. Both the $Power Shares水資源投資組合(PHO.US)$and the $First Trust Water ETF(FIW.US)$could be beneficiaries of the $55 billion that is set to be spent on water and wastewater infrastructure.
Upgrading broadband infrastructure
There's also an opportunity for certain sectors that could generate additional revenue through tapping previously unserved or underserved markets.Approximately $65 billion in spending is allocated to broadband infrastructure,with a focus on connecting rural and lower-income areas.
An estimated 30 million Americans lack access to reliable internet access, which became a particular pinch point during the pandemic as schooling and several industries went fully remote.
Funds like the $Global X Fds Data Ctr Reits & Digital Infrastructr(VPN.US)$and the $Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF(SRVR.US)$stand to benefit during the construction of physical assets linked to the guts of the internet, and will have new long-term customers from telecom providers or municipalities that decide to build their own internet service as an in-house utility.
Also,commercial REITsto reap some benefit from the bill's emphasis on electric vehicle adoption, since charging stations will need access to a range of real estate to keep drivers from running out of power.
Source: ETF.com