The increase seems inevitable because Trump appears unlikely to want to pay for the spending through taxation. This development will help foster a “favourable investment environment” for the sector according to Langley, of the Legg Mason affiliate.
Langley suggests raising equity in the public market would be the “most obvious” answer to meet the promised investment, and added it is a matter of when and not if the primary issuance comes through.
“Over time, as the need for capital to fund investment into the underlying assets comes through, we would expect to see the listed market get tapped. The listed market is four times larger than the private market, so we see a lot of call on the equity market over time,” Langley said.
He added: “We’ve been expecting the US to invest a lot more into its infrastructure for the last decade, and there has been a lot of chatter in the market about the size of the infrastructure plan and how it will be funded. But as these policies develop, it becomes more about how the government creates an environment to enable investment in infrastructure, without spending too much public money.”
Trump’s promises on the scale of investment have created a “solid backdrop” for investment in infrastructure assets and his agenda is good for confidence and the listed market, Langley argued
Langley also believes the outlook for renewable and alternative energy is more positive despite President Trump’s favouring of fossil fuels.
“The agenda and spend on renewables is going to continue largely unabated, despite Trump being a fan of fossil fuels,” he said. “In addition there is a significant programme required to replace aging electricity and water infrastructure in the US and continue the development of gas infrastructure to support the expected increase in industrial production.”
