It’s finally time to spend money on infrastructure

In 2016, investors thought there would be a major focus on rebuilding the nation’s infrastructure from the next president. Donald Trump and Hillary Clinton touted plans to spend more on highways, airports, the electric grid and other parts of America’s aging transportation and power networks.

Shares of companies like equipment giants Caterpillar (CAT) and Deere (DE) and materials makers Vulcan (VMC), Martin Marietta (MLM) and US Concrete (USCR) all surged before the election four years ago on hopes that more infrastructure spending was a slam dunk no matter who won.

They continued to soar after Trump won. Yet here we are in 2020, and little has been done on the infrastructure front – despite many experts saying trillions of dollars needs to be spent on transportation and broadband networks.

But this stimulus may be even more urgent now during the Covid-19 pandemic: Millions of Americans are out of work. Federal money earmarked for infrastructure could serve as a modern day version of FDR’s New Deal or Eisenhower’s Federal Aid Highway Act.

LOS ANGELES, CA - NOVEMBER 22: A jet lands at Los Angeles International Airport (LAX) on Thanksgiving eve, traditionally the busiest travel day of the year, November 22, 2006 in Los Angeles, California. The American Automobile Association (AAA) estimated 38.3 million people will travel 50 miles or more for Thanksgiving, and that 4.8 million travelers will fly to their Thanksgiving destinations. (Photo by David McNew/Getty Images)

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Related video US airports in desperate need of upgrades

There is a bipartisan call for such spending. New York Governor Andrew Cuomo, a Democrat, is pushing for an infrastructure package. So are Republican senators Roy Blunt and Roger Wicker.

Several Democrats in the House and Senate are also in favor of earmarking more Covid-19 stimulus funding for infrastructure.

But it’s unclear whether Democratic congressional leaders Nancy Pelosi and Chuck Schumer will be able to come to an agreement on anything with President Trump – especially during a contentious reelection campaign.

An infrastructure bill would help many Americans

But that isn’t stopping market experts and economists from dreaming of a big infrastructure package.

“If you spend on building something with long-term value, that could benefit all Americans,” said John Creswell, executive managing director at Duff & Phelps Investment Management. “Given all the spending on Covid-related stimulus, you’d think an infrastructure bill would be a no-brainer.”

In this image from video, House Speaker Nancy Pelosi of Calif., speaks on the floor of the House of Representatives at the U.S. Capitol in Washington, Friday, March 27, 2020.

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Creswell says he thinks there’s a 30% chance of a big bill passingthis year given that politicians will be focusing more on the coronavirus outbreak and upcoming November election.

But he thinks there’s a 50% chance of a big spending package getting passed if Trump wins a second term and up to 70% if Joe Biden becomes president – especially if a Biden win is accompanied by Democrats winning more seats in the Senate.

Creswell said a big spending bill could benefit a wide array of firms, ranging from wireless infrastructure company American Tower (AMT) to utilities such as American Water Works (AWK) and CMS Energy (CMS).

There is a lot of proverbial low-hanging fruit that could be fixed relatively easily if there was money dedicated to infrastructure projects, said Frank Rybinski, chief macro strategist with Aegon Asset Management.

Put money to work now while rates are extremely low

Rybinski said putting people to work to repair roads, highways and bridges and upgrade airports could have a lasting impact on boosting the economy that goes beyond giving Americans a steady paycheck.

Related article US Concrete CEO still supports Trump, holding out hope for a big infrastructure bill

“There is a lot of transportation infrastructure to upgrade. If you do simple things like taking out potholes and widening lanes, you can get goods to ship faster and more efficiently,” Rybinski said. “It would be a great way to get an economic boost and raise productivity for the long term.”

Rybinski added that now is an ideal time for the government to spend – even if it involves taking on more debt – since the Federal Reserve seems committed to keeping interest rates near zero for the next few years.

“The government should be doing this now while funding costs are cheap. Now is the time to borrow to spend,” he said.

Still, some may scoff at the notion that the government should spend even more right now.

A ‘blue wave’ could lead to more spending

One strategist also expressed concern about what might happen to the stock market if Biden wins and the Senate also goes blue.

That could lead to more spending – but also higher taxes to make sure the deficit doesn’t balloon further.

“In a Democratic sweep, the new administration might feel pressure to reduce the federal deficit while simultaneously increasing spending on health care and infrastructure,” said David Kelly, chief global strategist with JPMorgan Funds, in a report.

“This would likely mean higher taxes on wealthier individuals and corporations, both of which would negatively impact real, after-tax returns,” Kelly added.

The hope is that any boost to economic growth and productivity that could come from finally upgrading vital parts of the nation’s infrastructure would offset worries about higher tax rates.