In the decades following World War II, the United States went on a massive infrastructure spending spree.
The country created the interstate highway system, a massive network of roads, waterworks, airports and port facilities.
That spending created jobs.
Three-quarters of a century has passed since this infrastructure boom launched in the 1950s.
Not surprisingly, much of that infrastructure is in dire need of repair.
Further, the United States population has doubled since these infrastructure systems were put in place.
That means our infrastructure is dated and dangerously overstretched.
The American Society of Civil Engineers (ASCE) publishes regular “report cards” on the condition of infrastructure in the United States.
The ASCE recently gave U.S. infrastructure a grade of D-plus.
Under the ASCE grading system, a D-plus means that infrastructure conditions are “mostly below standard,” showing “significant deterioration” and carrying a “strong risk of failure.”
The issue is pressing, and with each passing day, the conditions get worse.
The ASCE estimated that the government needs to spend $4.6 trillion by 2025 to get U.S. infrastructure back to a state of good repair.
That’s not just for safety, but also because existing infrastructure inadequacies and bottlenecks will reduce U.S. GDP by trillions in the coming years.
It will cost the economy more to not spend the money…
How to Play the Ramp-Up in Spending
Now that President Biden’s $1.9 trillion stimulus bill has been passed by Congress, the White House’s next objective is a multitrillion-dollar infrastructure package.
Of course, all kinds of uncertainty exists about whether a bipartisan infrastructure bill can be passed…
That doubt has merit – but if not now, when?
COVID-19’s hit to the economy makes this the perfect time to pass an infrastructure bill and put people back to work.
A multitrillion-dollar plan could create millions of good-paying jobs.
From an investing perspective, the most obvious companies that will be big winners are the materials companies that will be involved with upgrading America’s roads and bridges.
Half of U.S. roads are in poor or mediocre condition, and one-third of bridges need repair, restoration or complete replacement.
According to analysts at Morgan Stanley, the government needs to spend upward of $400 million on concrete bridges, $800 million on concrete roads, $300 million for steel bridges and $1.6 trillion to get asphalt roads into acceptable condition.
That is a lot of money… and it will juice the revenues of companies in this sector.
What’s great about this infrastructure spending for investors is that it isn’t going to be a short-term burst.
The companies that will benefit will have strong financial results for many years.
This presents a long-term tailwind for investors to ride.
The most obvious way for investors to play this is through the Global X U.S. Infrastructure Development ETF (CBOE: PAVE).
The ticker symbol says it all – this exchange-traded fund (ETF) is a way to get long road repair!
The ETF includes heavy equipment, engineering and construction companies, as well as companies involved in the production of raw materials.
The Global X U.S. Infrastructure Development ETF was specifically built to profit from a massive government infrastructure spending plan.
Unfortunately, though, we may have missed our chance with this particular ETF.
From the bottom last March, the ETF is now up 250%.
The ETF is also almost 50% higher than where it has traded at any point since it was created in 2017.
So while I do think getting exposure to massive infrastructure spending in the coming years is appealing, I’m not sure that the Global X U.S. Infrastructure Development ETF is the way to do it at this time.
As is often the case, the most obvious way to play an opportunity isn’t the best way.
Stay tuned, and I’ll dig up a better way for us to profit from America’s badly needed infrastructure upgrade…