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Biden Administration Can PAVE Way To Opportunity With This ETF

December 1, 2020 12:45 pm
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Biden Administration Can PAVE Way To Opportunity With This ETF

Infrastructure investing, be it via individual stocks or exchange-traded funds, is often a tantalizing prospect, particularly in election years, but the asset class often vexes investors.

What To Know: Fact is politicians and candidates often make audacious promises about spending to shore up airports, bridges, railroads, streets and that was the case during this year's presidential campaign with both President Trump and now President-Elect Biden floating some big infrastructure numbers.

In part, those promises explain why the Global X U.S. Infrastructure Development ETF (CBOE: PAVE) jumped 16.55% in November. The $661.79 million PAVE tracks the INDXX U.S. Infrastructure Development Index.

Why It's Important: Another fact about infrastructure investing is that politicians' promises on this issue rarely hold up. After all, Congress hasn't passed a comprehensive infrastructure package since the Eisenhower Administration even though it's a rare bipartisan issue and they say “it's always Infrastructure Week” on Capitol Hill.

It remains to be seen if the incoming Biden Administration can work with a weakened Democratic majority in the House and perhaps – pending the results of January runoff elections in Georgia – no majority at all in the Senate to execute proper infrastructure legislation. However, the coronavirus pandemic, which hastened moves out of urban areas, underscores the need for comprehensive infrastructure legislation.

“From March through June, 80% more individuals were looking to move out of those cities than move in, and from May through August, move requests out of New York City were up 45% versus last year,” according to Global X research. “This does not mean that cities will cease to exist, but the distribution of populations across major cities, satellite cities, and suburban towns could evolve, placing different demands on physical and digital infrastructure.”

The pandemic underscores the importance of overhauling public transportation, some systems of which served as coronavirus “hosts.”

“Public transportation will need an overhaul that improves efficiency while limiting the spread of disease – a recent survey found that 24% of New York bus and subway workers have contracted COVID-19,” notes Global X.

What's Next: What's important about PAVE in relation to the incoming Biden Administration is that the ETF is the only of its peers dedicated to U.S. equities, meaning it would likely be the biggest winner if the president-elect and Congress can come together on a legitimate infrastructure bill.

“We expect that the Biden administration will push to have infrastructure investment included in any stimulus plan introduced in his first months in office,” according to Global X. “In 2009 when he was Vice President, Biden was a central figure in enacting 2009’s American Recovery and Reinvestment Act (ARRA), which allocated $105B to infrastructure investment following the Great Recession.”

Joe Biden. Benzinga file photo by Dustin Blitchok. 

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