The Importance Of Infrastructure—And What It Means For Investors

The Importance Of Infrastructure—And What It Means For Investors

On 15 November, after months of debate in the House and Senate, President Joe Biden signed the Infrastructure Investment and Jobs Act (IIJA) into law. The bipartisan effort, passed 69 to 30 in the Senate, is an attempt to fix the nation’s “investment-deficit disorder” that has seen the nation’s roads and bridges crumble and internet prices rise

The White House has heralded the landmark legislation as a “once-in-a-generation investment in our nation’s infrastructure and competitiveness.” The White House also predicts that the legislation may eventually ease inflationary pressures by strengthening the supply chain. And if the Build Back Better plan passes as well, the two bills will add 15 million jobs over 10 years

It’s important to remember that the $1.2 trillion bill isn’t a response to the pandemic or economic crisis. Instead, it’s a measure meant to address the nation’s need for updated infrastructure. In this way, lawmakers hope to help the United States once again become a global competitor. 

The scale of the IIJA also promises big potential for investors’ portfolios – if you know where to invest. 

The IIJA By Dollars

Any way you slice it, the IIJA is enormous. The bill spans over 2,000 pages and takes a multi-pronged approach to address both national and local needs, granting:

  • $110 billion to repair roads, bridges, and transformational infrastructure projects. These dollars will also reauthorize current transportation programs for five years. 
  • $90 billion in guaranteed funding to modernize transportation. This includes reauthorizing existing programs, expanding public transit nationwide, improving accessibility, and replacing thousands of vehicles with zero-emission options. 
  • $66 billion to improve the nation’s railway systems. 
  • $65 billion for power grid upgrades and developing clean energy technologies. 
  • $65 billion to expand high-speed internet access to rural areas and reduce prices. 
  • $55 billion toward expanding access to clean drinking water, including $15 billion to replace lead piping. 
  • $50 billion to weatherize the nation against droughts, heat, floods, and wildfires. 
  • $25 billion to repair and upgrade airports, reduce congestion and emissions near airports, and increase airport electrification. 
  • $21 billion toward tackling “legacy pollution” like abandoned mines, orphaned oil and gas wells, and Superfund and brownfield sites. 
  • $17 billion to upgrade port infrastructure and waterways. 
  • $7.5 billion to build a national network of electric vehicle (EV) charging stations. 

Buried in these broad-sweeping plans lies a variety of interests, such as $350 million pilot program to reduce vehicle-wildlife collisions. The legislation also promises hundreds of millions of dollars to restore port bays and waterways. (Not to mention a full $1 billion to restore the Great Lakes.) 

The IIJA also establishes several new programs to address current needs. For instance, the $5 billion Safe Streets for All program aims to reduce traffic fatalities by supporting “safe…independent movement.” And the National Infrastructure Project Assistance grant will fund large, critical projects in communities that can’t afford necessary upgrades. 

How Does the Bill Help?

The goal of the IIJA is to rebuild America’s infrastructure. Broadly speaking, “infrastructure” includes everything from roads, bridges, and rails to waterways, broadband internet, and even addressing the climate crisis. 

The IIJA also adopts formal language and definitions to shape the nation’s approach to addressing some of these issues. Another potential side effect is easing inflation by strengthening ground and port transportation services. 

Although it may take some time to see the dollars take effect, the bill is set to fund life-changing investments for Americans. 

Take the nationwide EV charging network. With guaranteed “refueling” stations available, shipping companies could more heavily invest in EV production and purchases. In turn, not only will the price of consumer goods stay steadier, but the cost of a new EV could shrink, too. 

And as nationwide emissions drop, Americans could even become healthier. Other areas of clean energy would improve, too, as the nation turns toward renewables to power the grid. 

Expanding broadband internal into rural areas could also have drastic impacts. For instance, as reliable internet becomes more widely available, people may move away from big, expensive cities into the heartland, possibly triggering a rural housing boom. And with expanded access to airports, traveling may become more affordable, leading to increased airline use. 

When Does the Bill Go into Effect? 

Technically, the IIJA went “into effect” when it was signed. However, it’s likely to be months or even years before tangible signs ripple in the economy. Some of the money will boost currently existing programs, pumping up agencies like the DOT, EPA, and DOE. Other dollars will flow into states and municipalities in the form of grants, which may occur more slowly due to the rule-making and application process. 

What Does the Bill Mean for Investors?

The infrastructure bill doesn’t just pump dollars into improvements; it also translates to jobs filled and materials bought. Companies around the nation will have to hire labor forces, purchase everything from concrete to computers and strategize with engineering firms and local experts to make the improvements happen. 

If the IIJA proves successful, it could dramatically affect how Americans work, travel, and relax. But you won’t just benefit going about your day—with a few strategic investments, you may see a positive impact in your portfolio, too. 

After all, when productivity skyrockets and the economy booms, the stock market has a chance to grow right along with it. Even if you can’t see the effects immediately, investing in infrastructure is investing in our collective future—a principle that every long-term investor understands well.

Let’s look at three big sectors where your investment dollars may work a little harder thanks to the IIJA. 

Construction, Equipment and Industrials

Construction and related stocks are an obvious pick for investors seeking to profit off the IIJA, especially those that have to do with road repair. If you’re looking to get in on the upcoming construction boom, you may consider:

  • Gravel makers like Vulcan Materials

    VMC
    or Martin Marietta Materials

    MLM
    (which also produces chemicals for industrial, environmental, and wastewater treatment applications)
  • Equipment makers and suppliers such as John Deere, Caterpillar

    CAT
    and United Rentals 
  • Planning and designing firms like Jacobs Engineering Group
  • Steelmakers such as Nucor

    NUE
    and U.S. Steel

And if you don’t want to go digging through the nitty-gritty to profit from it, you can also look for an ETF that contains all these and more. One prominent fund is the Global X U.S. Infrastructure Development ETF, which holds roughly 100 infrastructure stocks as well as IT, utilities, and even financial companies. 

Transportation

Investors who want to profit off the impending transportation boom can go a few routes. 

In addition to buying into road construction stocks, one specialty choice is ChargePoint Holdings. This firm builds customized EV charging stations that can fit everywhere from a parking lot to a parking garage. If President Biden plans to fulfill his goal of 500,000 EV stations nationwide by 2030, charging station makers are a necessary component. 

Of course, EV makers are also poised to benefit from the IIJA. This includes established EV automakers such as Tesla

TSLA
and Rivian, as well as up-and-comers like Fisker and Canoo. 

Internet and Communication Infrastructure

Bringing high-speed broadband internet to rural America won’t be a quick task. But if you’re looking to invest in the financial potential of nationwide internet, there are plenty of opportunities to be had, including:

  • Internet companies like Comcast

    CCZ
    and Charter
  • 5G provides including Verizon and AT&T
  • Cloud computing firms and technology such as Amazon, Microsoft

    MSFT
    , Google and IMB

You can also invest directly in the wires and fiber optic cables required to bring internet to the masses with a real estate investment trust (REIT) like Crown Castle International

CCI
. This wireless tower REIT owns more than 40,000 cell towers and around 80,000 miles of cable. 

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