Months of negations between political parties came to an end last week with a finalized bipartisan infrastructure package, which President Joe Biden signed into law on Monday, November 15th. The infrastructure package was one of the largest spending packages to date in U.S. history, totaling $1.2 trillion across a variety of initiatives.
The freshly signed bill will provide $550 billion1 in new federal investment in America’s infrastructure over a five-year period and the remaining $650 billion1 is for previously budgeted and approved projects in backlog. This large investment is estimated to create a large sum of jobs over the duration of the plan2 with estimates ranging from 500,000 to millions. The chart below breaks down the allocations detailed in the bill.
The legislation included several measures to pay for the bill none of which included an increase of taxes at this time. Lawmakers are funding the package by repurposing unused assets such as the COVID relief funds; additional funding would come from imposing Superfund fees and tax reporting requirements on cryptocurrencies3. Further funding, according to the Congressional Budget Office (CBO), is estimated to add $256 billion to the nation’s budget deficit over the next 10 years with a final evaluation to be released in the coming weeks1.
Unlike many of the COVID relief stimulus packages, our opinion is the infrastructure bill will not provide an instant jolt to the economy. Infrastructure buildouts, whether it’s modernizing the electric grid or improving roads and highways, tend to be multi-year projects and will be much more of a long-term support for various industries and jobs that are difficult to outsource.
From a market perspective, it was widely considered that there would be some type of legislation passed and may have been priced into the market prior to the announcement. At this point, it may be too early to predict which sectors and industries are rightly positioned to capitalize on the additional government spending. However, we are seeing positive trends in:
- Basic Materials – Building material companies
- Industrials – Engineering & Construction companies
- Transportation – Automotive makers and OEM companies
- Information Technology – Solar companies
Lastly, the infrastructure bill is a massive investment into the U.S. economy that will create initiatives to support future growth. However, the passage of this package and any future legislation should not alter your long-term investment road map but may instead open the door to future opportunities to add value within investment portfolios.