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ETFs to Gain on Biden's Infrastructure Deal

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Wall Street cheered President Joe Biden’s announcement of the White House striking an infrastructure deal with a bipartisan group of senators. Notably, the S&P 500 index climbed about 0.6% to a record closing high of 4,266.49 on Jun 24, fully recovering the losses arising from Fed’s recent hawkish stance. Moreover, the Dow Jones Industrial Average and the Nasdaq Composite indices were also up 1% and 0.7%, respectively, in the same period.

According to the White House, the infrastructure deal will include $579 billion in new spending. Going by a CNBC article, the proposal will allocate about $312 billion to transportation, with $109 billion going for development in roads, bridges and other major projects, $66 billion in passenger and freight rail and $49 billion in public transit. Going on, about $15 billion will be invested toward electric vehicle infrastructure and electric buses and transit, much lesser than what Biden initially proposed. Furthermore, $266 billion will be allocated toward non-transportation infrastructure, including $73 billion for power, $65 billion for broadband and $55 billion for water.

Notably, 11 Republicans and 10 Democrats have supported the infrastructure framework. However, to gather 60 votes required to pass the bill in the Democratic-held Senate, support from the Democratic leaders will be required, per the same CNBC article.

Moving on, several different methods were discussed to pay for the plan. Biden administration was not supportive of increasing gas tax, raising an electric vehicle user fee and increasing taxes on someone who earns under $400,000 per year, as mentioned in a CNBC article. Meanwhile, Republicans did not support the proposal to increase the corporate tax rate to 28% from 21%.

Instead, the proposal now requires to raise IRS enforcement to make sure wealthy people pay their taxes, per a CNBC article. Moreover, unused state and local coronavirus relief funds will be allocated to infrastructure. The framework also proposes private-public partnerships and bonds, among several other potential funding mechanisms, according to the same article as mentioned above.

ETFs to Gain

Let’s take a look at some ETFs which can shine bright following the new infrastructure deal:

iShares U.S. Infrastructure ETF (IFRA - Free Report)

The fund offers exposure to U.S. infrastructure companies that could benefit from a potential increase in domestic infrastructure activities. The fund has AUM of $589.6 million and charges 40 basis points (bps) in fees.

Invesco Dynamic Building & Construction ETF (PKB - Free Report)

The underlying Dynamic Building & Construction Intellidex Index comprises stocks of U.S. building and construction companies. The fund has AUM of $ 287.6 million and charges 59 bps in fees (read: What Awaits Housing ETFs as US Existing Home Sales Drop Again?).

The Materials Select Sector SPDR Fund (XLB - Free Report)

The most-popular material ETF follows the Materials Select Sector Index. This fund manages $9.64 billion in its asset base. The ETF charges 12 bps in fees per year from investors.

First Trust Nasdaq Transportation ETF (FTXR - Free Report)

The investment objective of the fund is to seek investment results that correspond generally to the price and yield, before the fund's fees and expenses, of an index called the Nasdaq US Smart Transportation Index. With AUM of $1.17 billion, the fund has an expense ratio of 60 bps (read: 5 ETFs Set to Soar on Strong Memorial Day Travel Rebound).

Global X Autonomous & Electric Vehicles ETF (DRIV - Free Report)

The fund seeks to invest in companies involved in the development of autonomous vehicle technology, electric vehicles (“EVs”), and EV components and materials.  This includes companies involved in the development of autonomous vehicle software and hardware as well as companies that produce EVs, EV components such as lithium batteries, and critical EV materials such as lithium and cobalt. The $924-million fund charges 68 bps in fees (read: 5 Most-Crowded Trades & Their Winning ETFs).

Vanguard Communication Services ETF (VOX - Free Report)

The underlying MSCI US Investable Market Communication Services 25/50 Index is designed to capture the large, mid and small cap segments of the U.S. equity universe. The fund charges 10 bps in fees and has AUM of $4 billion (read: ETFs in Focus on AT&T-Discovery Mega Merger Deal).

Invesco Water Resources ETF (PHO - Free Report)

The underlying NASDAQ OMX US Water Index tracks the performance of U.S. exchange-listed companies that create products designed to conserve and purify water for homes, businesses and industries. The fund has AUM of $1.67 billion and charges 60 bps in fees.

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