From the Wall Street Journal:
[President-elect] Obama's plan for new U.S. spending could benefit funds that hold construction, engineering and alternative-energy stocks
The promise of the incoming Obama administration has thrown a new light on certain sectors of the stock market, and on the exchange-traded funds that track them.
Building and materials stocks were crushed in 2008 by the global economic slowdown. But some investment professionals see new long-term opportunities in construction-related industries as the U.S. prepares to invest heavily in infrastructure improvement.
Investor interest has grown since President-elect Barack Obama in a Dec. 6 radio address outlined a plan to create millions of jobs in the U.S. by "making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s." Mr. Obama, who takes office on Jan. 20, pledged to invest in roads and bridges, make public buildings more energy-efficient, modernize schools and improve Internet-based communication and its availability.
And that's just part of an expected global surge in infrastructure spending. "Governments around the world are making plans to jump-start their economies by throwing hundreds of billions of dollars at infrastructure projects," notes Robert Markman, portfolio manager of the Markman Global Build-Out Fund, a conventional mutual fund that opened for business in September.
That spending could boost infrastructure-related ETFs launched in recent years in anticipation of a long-term global infrastructure boom driven by emerging-markets countries. Those ETFs -- which invest in industries including construction, engineering, utilities, building materials, industrial equipment and metals -- have been battered by worries about a near-term slump in private-sector construction spending.
"There are buying opportunities in many infrastructure ETFs," says Matt McCall, president of investment adviser Penn Financial Group LLC in Ridgewood, N.J.
Mr. Obama also has promised to focus on the development of alternative energy sources, another global trend, so investors may want to keep an eye out for further developments on that front. But his infrastructure plans appear far more advanced and so are likely to have a more immediate impact on stocks.
'Megatrend' Seen in Place
To be sure, infrastructure-related ETFs, like other narrowly focused funds, are unsuitable as core portfolio holdings. The S&P Global Infrastructure Index lost 41% in 2008, close to the 42% loss for the S&P Global 1200 Index, according to Standard & Poor's.
Losses among ETFs included a 32% decline by the SPDR FTSE/Macquarie Global Infrastructure 100 ETF and a drop of 39% by the iShares S&P Global Infrastructure Index Fund.
But Mr. McCall says he still believes in the infrastructure "megatrend" toward higher global spending. And engineering and construction stocks got a boost late last year after Mr. Obama outlined his infrastructure plans....MORE