According to Jeffrey Parker, CIO Equity US at Allianz Global Investors, infrastructure is an interesting area for yield in the next three to five years.
For one, Hillary Clinton has promised to spend $275bn over a five-year period on an infrastructure plan that the Democrats say would be “a game-changer” for the US economy. Aimed at creating middle-class jobs, the program would invest heavily in US “highways, airports and ports.”
“Workers can’t get to work, congestion keeps parents stuck in traffic, floods threaten our cities, and airports leave travellers stranded for hours or even days at a time,” said a fact sheet about the proposal.
In a speech on 22 June 2016 Clinton explained that at the heart of her plan will be “the biggest investment in American infrastructure in decades, including establishing an infrastructure bank that will bring private sector dollars off the sidelines and put them to work there.”
The infrastructure bank idea was originally put forward by Barack Obama, but lacked Republican support in Congress.
In fact, Congress has made clear that it would like to decrease federal infrastructure spending. But according to The American Society of Civil Engineers estimates, there is $3.6trn of infrastructural work to do in the US before 2020.
And the need to spend more on domestic infrastructure seems to be an issue that both Trump and Clinton agree on. Donald Trump for his part has claimed he would spend “at least double” the amount Clinton mentioned, called for spending up to $1trn on new roads, bridges, and broadband.
Grant Bughman, equity specialist at UBS Asset Management, pointed out that monetary policy can only go so far if you look at the landscape for economic growth in the US and elsewhere. While he is indeed sceptical of the government’s desire to increase spending on a federal level and instead believes it will be more on a local level.
“I live in New York,” he said, “and the roads, bridges and transit are not top quality there. In New York we’re rebuilding La Guardia airport at the moment for example, but the funding is coming from local municipalities.”
