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President Trump’s Agenda Is Good News for Income Investors

President Trump may be an income investor’s best friend by renewing his pledge to invest heavily in infrastructure in his speech to Congress. “To launch our national rebuilding, I will be asking the Congress to approve legislation that produces a $1 trillion investment in the infrastructure of the United States­—financed through both public and private capital—creating millions of new jobs,” Trump said in his address.  

Along with jobs, that investment also will deliver higher growth and more solid opportunites for dividend income. Trump’s plan is still in the early stages and won’t be implemented until 2018, giving  investors some time to identify which stocks should benefit before their prices spike higher next year.

While Democrats and Republicans still must hash out the details, we have heard that the final infrastructure bill could combine hard dollars with tax credits. Of course, that’s assuming Congress can agree on how to pay for Trump’s many other proposals, including tax cuts and more defense spending. The latter also presents investing opportunities.

During the campaign, Trump proposed $137 billion in federal tax credits to private investors of infrastructure projects, which he claimed would total $1 trillion over 10 years. For several years now, we have been watching the infrastructure investment opportunity build, as demographics and aging structures support the trend. A report by consultant Bain & Company found that crumbling infrastructure in developed countries and a surge of infrastructure building in developing economies means infrastructure spending will grow 4% annually “well into the second half of this decade, pushing total investment to $4 trillion.”

While transportation infrastructure gets much of the attention, energy infrastructure shouldn’t be overlooked.  Global energy use is projected to grow 56% between 2010 and 2040. The U.S. Energy Information Administration attributes half of the increase to China and India. Power generation will be the fastest-growing sector, with worldwide electricity use projected to increase 90% from 2010 to 2040 and developing countries accounting for most of that rise.

And by putting a white hot spotlight on the infrastructure issue as only a U.S. President can in a televised speech, more businesses will be looking for a way to get a piece of the spending pie. For more details, tune into the next issue of Personal Finance, which will explore which investments should benefit from Trump’s defense and infrastructure spending.

 

 


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