On\nNovember 15, President Biden signed the bipartisan, roughly $1 trillion\ninfrastructure bill into law. This level of infrastructure spending marks the\nlargest federal investment in infrastructure in over 10 years, and largely\nfocuses on traditional forms of infrastructure: roads, bridges, power grids,\netc. <\/p>\n\n\n\n
Plenty of\npolitics came into play for getting this law passed \u2013 I will not cover them\nhere. But now that the bill has become law, investors can set aside political\nimplications and focus on pure policy, specifically how the new spending might\naffect the economy and markets.1<\/sup><\/p>\n\n\n\n Are You Looking for the Right Time to Invest? <\/a><\/strong><\/p>\n\n\n\n Whether you are looking to invest for retirement or just for your long-term financial success, we offer all of our reader’s insight on key forecasts to look out for. <\/p>\n\n\n\n As the\ninfrastructure bill becomes a law, it will have an impact on the market. Just\nhow it will impact the market is unknown, and it is these unknowns that make trying\nto time the market so risky. Instead, we advise investors to diversify their\nportfolios and define their financial roadmap. To help you do this, I am\noffering all readers our just-released Stock Market Outlook report. This report\ncontains some of our key forecasts to consider such as:<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!\u00a0 First,\nlet\u2019s dig into what\u2019s in the infrastructure bill, which ultimately amounts to\nan additional $550 billion above projected federal spending on roads, bridges,\nexpanded broadband access, and more. Here\u2019s a roundup of the new spending:<\/p>\n\n\n\n In terms\nof economic impact, $1 trillion is approximately 5% of GDP \u2013 not a significant\nboost, but also not negligible. The key for measuring economic impact is\nunderstanding when <\/em>the money will be\nspent and how <\/em>it will be paid for. <\/p>\n\n\n\n Regarding\nthe \u2018when,\u2019 this new spending will not happen all at once. States should see a\nmajor boost in core highway funding relatively soon, but money for most of the\nother projects could take months or perhaps even years, arguably minimizing the\nshort-term economic impact.<\/p>\n\n\n\n Spending\non modernization of public transit, for instance, will have to wait for\nCongress to pass a spending bill, which will likely come later in the year.\n$120 billion of the new funding comes in the form of competitive grants, which\nmeans the government will need to roll out grant programs and companies will\nneed to bid for the jobs, like bridge replacements or new rail lines. The grant\nprogram and approval process could also take about a year. Incrementally higher\nspending over long periods will likely not create a material boost to GDP.<\/p>\n\n\n\n Regarding\nthe \u2018how\u2019 the money will be raised, it will come from an assortment of revenue\nstreams, but none of them include higher taxes \u2013 a plus for the economy. Some\nof the money has already been appropriated, including $200 billion in\nrepurposed funds meant for Covid-19 relief. $50 billion will come from delaying\na rule regarding Medicare rebates, and $50 billion more will come from states\nthat did not use unemployment insurance supplemental funds. In short, no new\ntaxes and no major near-term increases to the deficit should also mean\nrelatively minimal economic impact.<\/p>\n\n\n\n As far as\nmarkets are concerned, a relatively muted economic impact likely translates to\nmodest market impact, which I would argue is already priced into stocks. It has\nbeen widely known for some time now that the infrastructure bill would almost\ncertainly pass, which means markets have already discounted its impact on\nearnings and growth, in my view. Investors should not expect some brisk\ntailwind now that the bill has been signed into law.<\/p>\n\n\n\n Bottom Line for Investors<\/strong> <\/p>\n\n\n\n In my\nview, the passage of the infrastructure bill is not a zero-impact event, but it\nis also not a major market mover that should drive the next leg of the bull\nmarket. I think it is perhaps best framed as a \u2018modest tailwind\u2019 for the\neconomy and markets, with some sectors (Industrials, Materials, perhaps\nUtilities) faring better than others. <\/p>\n\n\n\n The real\nkey takeaway for investors, in my view, centers around an idea I write about a\nlot in this space: how did reality\ncompare to expectations? <\/em>In the case of infrastructure, the bill started as\na $2.3 trillion spending package that included tax increases to pay for it.\nHigher taxes and higher deficits could arguably be an issue for stocks, but the\nreality of the infrastructure law is that it is less than 50% of its original\nsize with no tax increases and fairly modest new deficit spending \u2013 a reality\nbetter-than-expectations, in my view, which I see as a positive for markets. <\/p>\n\n\n\n
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IT\u2019S FREE.\u00a0Download the Just-Released November 2021 Stock Market Outlook<\/a>2<\/a><\/sup><\/strong><\/p>\n\n\n\n
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