Infrastructure is Back on the Front Burner
Author: Greg Valliere
June 16, 2020
STOCK FUTURES ARE HIGHER THIS MORNING, based in part on overnight reports that the Trump Administration is considering a $1 trillion infrastructure spending program. There aren’t many details, but our initial sense is that this is a smart move, economically and politically, with a chance of enactment.
TRUMP HAS URGED MORE INFRASTRUCTURE SPENDING, and we agree with his assessment that there couldn’t be a better time to tackle the country’s crumbling highways, bridges, dams, tunnels, etc. Why now? Interest rates are close to zero and unemployment is high; if we’re going to tackle infrastructure, now’s the time.
THE MEASURE ALSO IS LIKELY TO INCLUDE funding for telecom infrastructure and rural broadband, according to the Bloomberg article. Trump has scheduled an event at the White House for this Thursday to discuss broadband access, and it’s possible that more details on infrastructure will be available then.
IT’S UNCLEAR WHETHER THIS PROPOSAL would be attached to the new coronavirus spending bill that is starting to take shape in Congress. If Trump attached infrastructure spending to this measure, there would be a decent chance that Democrats would consider supporting it, since they have long advocated more infrastructure spending.
OR LAWMAKERS COULD WAIT TO RE-AUTHORIZE the current infrastructure spending bill, which expires when the fiscal year ends on Sept. 30. Delaying a measure until fall, or making it a stand-alone bill, would diminish its chances, since neither party would be interested in cooperating on a bill right before the election. The percentage move would be to attach it to the next virus stimulus — which is a “must pass” measure.
HOW TO PAY FOR IT? That’s always been the main obstacle, since Congress is unwilling to support a gasoline tax hike (even with lower prices at the pump). Some administration officials, including Commerce Secretary Wilbur Ross, have proposed private sector funding. In the final analysis, an infrastructure bill may not be paid for.
WHAT UNITES TRUMP WITH DEMOCRATS on this issue is the need for more jobs and an economic booster shot. The GDP impact of this wouldn’t be felt until 2021, but it surely would be a psychological plus for an economy that needs all the help it can get.
AND FOR TRUMP, this could be a win-win politically — if he got more infrastructure
spending in the virus bill, it would be a major victory. If Democrats balk, he could
blame them for refusing to address the country’s obvious infrastructure needs. In
either case, infrastructure is back on the front burner.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Asset Management (Asia) Limited (AGF AM Asia) and AGF International Advisors Company Limited (AGFIA). AGFA is a registered advisor in the U.S. AGFI is registered as a portfolio managers across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. AGF AM Asia is registered as a portfolio manager in Singapore. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
© 2020 AGF Management Limited. All rights reserved.
