Biden Administration unveils $2.3 trillion infrastructure proposal
Last Wednesday, the White House detailed its infrastructure proposal; here are the main takeaways and what we feel they mean for high-grade credit:
$620 billion for transportation including $174 billion for investment in electric vehicles (EVs). Construction to update America’s infrastructure such as bridges and roads is the bread & butter of the bill with the most bipartisan support. Government contracts tend to be well-paying and with much of the work going to companies such as Caterpillar, Deere, and others, this should be a boost for the industrials names in which we invest. The investment in EVs has less obvious effects; it could harm oil & gas companies if adoption is strong through it will likely just provide a small boost to EV manufacturing that covers most global car manufacturers at this point.
$300 billion to manufacturing primarily targeting domestic manufacturing. Much of the manufacturing spending targets green initiatives. However, spending earmarked for semiconductor manufacturing has a chance to have a high impact on the U.S. Intel has already made plans to open a new foundry in Arizona, suggesting that the bill is working. Right now, Taiwan is the world’s destination for semiconductor manufacturing, so if the U.S. can capture some of that market share, it would be additive to jobs for companies that specialize in the manufacturing components.
Approximately $250 billion for research. The Biden Administration unveiled large spending on research surrounding semiconductor manufacturing and advanced computing.
Approximately $215 billion for affordable housing. Likely be the most challenging as the domestic housing market has shown no signs of declining since the Great Financial Crisis, investment in housing might boost housing starts, potentially providing a boon for domestic construction and industrial companies.
The rest of the spending is spread across areas like home- and community-based care for the elderly and disabled as well as education investments. The effects of this spending on credit and the economy are less clear.