[00:00:33] What’s been driving the infrastructure market over the last quarter?
Over the last quarter, the infrastructure market has seen stronger-than-expected returns, driven by steady progress in businesses and a shift towards defensive assets amid economic uncertainty. Infrastructure, known for its stability and predictability, has held up well despite rising interest rates and inflation. The recent focus on job reports and economic outlooks has further supported infrastructure as a defensive investment. Overall, infrastructure continues to provide stability and real growth over time, even in volatile market conditions.
[00:03:04] Have any sectors or companies significantly impacted the strategy over the last quarter?
In the last quarter, utilities have been the standout performers in the infrastructure portfolio, benefiting from their defensive nature and stable earnings. Companies like WEC Energy saw significant gains, reflecting market conditions. Communications infrastructure, particularly mobile phone towers like Crown Castle and American Tower, also performed well despite inflation sensitivity. On the transport side, Norfolk Southern, a freight rail business, saw its share price rise following management changes and strong quarterly results. Overall, these sectors have driven performance amidst market volatility.
[00:06:07] How could the different outcomes of the upcoming US election impact infrastructure assets?
Polls indicate a tight race, suggesting no dominant swing towards either Republicans or Democrats, which means extreme policy changes are unlikely. One key issue is the potential unwinding of the Inflation Reduction Act (IRA), which provides tax incentives for renewables. While this could affect utilities, it’s not a game changer as these companies have other growth drivers and have thrived under various administrations. Overall, the election’s impact on infrastructure is expected to be limited.
[00:08:38] What's your outlook for infrastructure?
The outlook for infrastructure can be divided into two parts: fundamentals and market outlook. Fundamentally, infrastructure businesses are defensive and provide essential services, making them less reliant on economic conditions and likely to see continued growth. On the market side, predicting short-term share price movements is challenging, but current valuations appear reasonable given the interest rate environment. If rates remain stable or fall, infrastructure investments are well-positioned to deliver solid returns, potentially even better than expected. The outlook is more positive compared to recent years, assuming no repeat of significant inflation and interest rate spikes.
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