Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
WHILE petrol shortages may be dominating the news agenda this week, the global economy continues to deliver more positive news. Oil prices at US$80 per barrel may speak of supply distribution concerns, but they’re also consistent with a continuing global economic recovery.
Meanwhile, President Biden’s immense spending plans are moving tentatively closer to being turned into law. Least contentious, so most likely to gain House approval, is a US$1 trillion Senate-passed infrastructure bill containing US$550 billion in new funding.
Approval of the bill has been challenged by progressive Democrats who had wanted to pass a much larger (US$3.5 trillion) social and environment spending bill first. However, comments reportedly made by House Speaker Pelosi in a caucus meeting yesterday suggest the way may be clearing for a vote on the infrastructure bill tomorrow1.
The bill’s passing would bring much needed cash to upgrade America’s transport infrastructure and broadband networks and create thousands of construction jobs for voters in constituencies up and down the land.
Infrastructure spending on the scale we are likely to see is positive not only for the US economy but for world growth too, owing to an increased demand for basic materials and contracts for foreign companies. It’s already been quite a year, for example, for Britain’s construction equipment hire firm Ashtead, which earns around 82% of its revenues from the US2.
This plays into a recent theme in stock markets, whereby stocks sensitive to changes in economic conditions have been performing increasingly well compared with growth stocks like Apple and Microsoft.
However, this bill and the social and environment bill set to follow it will likely generate further, substantial opportunities to technology providers both at home and abroad.
Technology remains critical to offsetting the polluting effects of construction via complementary sources of clean energy (wind, solar, hydroelectric, hydrogen); energy efficiency projects (e.g. LED lighting, HVAC – heating, ventilation and air conditioning); 3D printed architecture; and batteries for off-grid energy storage and electric vehicles, to name but a few.
Thus, the medium term future for a wide range of companies will be improved by the realisation of Biden’s spending aspirations, not just America’s traditional infrastructure giants like Caterpillar, Nucor (steel) or Vulcan Materials (construction aggregates).
Examples of funds on Fidelity’s Select 50 list likely to benefit from this continually evolving environment include the Brown Advisory US Sustainable Growth Fund. Current large holdings include Microsoft, the communications infrastructure company American Tower, and the science and technology innovator Danaher.
Progress in the US might be expected to spur government led projects in other regions too, including the UK. The FP Foresight UK Infrastructure Income Fund is managed by an award winning team of infrastructure investment specialists. It targets an attractive annual income from its investments of 5%, although this amount is not guaranteed.
The Foresight UK Infrastructure Income Fund is one of three funds with a sustainability focus that feature among Tom Stevenson’s five fund picks for 2021.
1 NBC News, 28.09.21
2 Ashtead Group, 15.06.21
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. The Brown Advisory US Sustainable Growth Fund invests in a relatively small number of companies and so may carry more risk than funds that are more diversified. The FP Foresight UK Infrastructure Income Fund may use financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. The FP Foresight UK Infrastructure Income Fund investment policy means it invests mainly in units in collective investment schemes. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.
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