- President Trump promised an investment in U.S. infrastructure of about $1 trillion over 10 years. CIO Wealth Management Research (CIO WMR) estimates this number may eventually be closer to $300-600 billion.
- The potential bright spot is the role that private capital can play as a funding solution, including through creating tax incentives and structures that encourage investment in new infrastructure.
- Investment opportunities remain. CIO WMR maintains an overweight view on U.S. equities in its globally diversified portfolios and retains an underweight position on U.S. government bonds vs. risk assets.
- Talk to your UBS Financial Advisor about how your portfolio can be best positioned for administration policy changes and market movements.
As a candidate and as a president, Donald Trump has proposed bold spending initiatives, including $1 trillion in rebuilding America’s infrastructure. And while investing in U.S. airports, maritime ports, surface transportation and more has generally received bipartisan congressional support, budgetary and political challenges remain, leading CIO Wealth Management Research (CIO WMR) to estimate any final package to be closer to $300-600 billion.
A range of possible solutions
The potential bright spot is the role that private capital can play as a funding solution, and there are several long-term strategies and opportunities investors can leverage, depending on the size and scope of spending—as outlined in its fifth “POTUS 45” report entitled “New spending plans: It’s a funding challenge.” It explores the current legislative landscape as well as the implications of infrastructure spending for U.S. equities and U.S. fixed income.
The potential cost of inaction
However large the eventual spending amount will be, the importance of infrastructure development is not lost on either party. And CIO WMR asserts that a failure to address these structural deficiencies could put Americans at a competitive disadvantage globally across many sectors, exacting a steep economic toll. If left unfilled, the cost of the infrastructure gap over the next decade could be $4 trillion in lost GDP and 2.5 million lost jobs. Thus, it’s not surprising that the idea of improving America’s infrastructure elicits bipartisan support. But, that that support breaks down over the matter of how to pay for it.
The first 100 days
The Trump presidency began with high investor expectations for its pro-growth policy agenda of tax reform, regulatory relief and infrastructure spending. And, overall, investors remain optimistic as the 100-day mark of the administration nears, as evidenced in our just-released survey of investors in UBS Investor Watch: On your mark…
Since inauguration day, the markets have largely undone the initial gains immediately following the election. However, while it’s easy to view this phenomenon pessimistically, it also means that continued progress on the agenda should be positive for market performance, according to CIO WMR.
For more on the potential infrastructure budget solutions as well as the timing, and implications for financial markets and the economy, read the full report .
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