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The Top 6 Infrastructure Investment Opportunities

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Infrastructure Investment

Infrastructure Investment

This infographic is available as a poster.

The Top 6 Infrastructure Investment Opportunities

The U.S. government is putting a focus on infrastructure investment. For years, the country’s infrastructure—critical structures and facilities like roads, power supplies, and internet access—has been in poor condition.

Now, the government is pledging billions of dollars in funding. In this graphic from New York Life Investments, we explore how this public commitment translates into six potential infrastructure investment opportunities.

Breaking Down the Infrastructure Investment and Jobs Act

The Infrastructure Investment and Jobs Act was signed into law in November 2021. It includes nearly $550 billion in new investments.

CategoryInvestment Amount
Transportation$283.8B
Broadband$65.0B
Energy & Power$65.0B
Water$63.3B
Climate & Cybersecurity Resiliency$47.2B
Environmental Remediation$21.0B

Based on these commitments, here are the six categories that present potential infrastructure investment opportunities.

1. Transportation

52.0% of new government funding

Because infrastructure has been underfunded for some time, transportation systems are in a state of disrepair.

  • 43% of roads are in poor or mediocre condition
  • 231,000 of the country’s 617,000 bridges are in need of repair or preservation work

New government funding will enable the expansion and repair of transportation infrastructure.

The infrastructure investment opportunity: Funding could increase revenue and provide stable long-term contracts to engineering, materials, and construction companies.

2. Broadband

11.9% of new government funding

Millions of Americans don’t have access to broadband (high speed) internet, and the number of people who don’t use it is even higher due to affordability issues.

  • People without access: 14.5 million
  • People who don’t use broadband: 120.4 million

New government funding will increase access and help reduce prices.

The infrastructure investment opportunity: Funding could boost the customer base and revenue of internet service providers.

3. Energy & Power

11.9% of new government funding

The U.S. has set a goal to have net zero emissions by 2050, yet the country gets most of its energy with fossil fuels.

SourcePercent of U.S. Energy Consumption in 2020
Petroleum34.7%
Natural Gas 34.0%
Renewables12.5%
Coal9.9%
Nuclear8.9%

New government funding will help build electric power transmission lines and facilitate clean energy technology.

The infrastructure investment opportunity: Funding could boost the revenue of utility, manufacturing, and renewable energy companies.

4. Water

11.6% of new government funding

U.S. water infrastructure is aging, with 14-18% of potable water lost through leaks. The annual costs of wasting this treated water is projected to increase from $7.6 billion in 2019 to $16.7 billion in 2039.

New government funding will modernize water infrastructure, invest in water storage and recycling, and remove lead pipes.

The infrastructure investment opportunity: Funding could boost the revenue of engineering firms and companies that build, install, and repair water pipes.

5. Climate & Cybersecurity Resiliency

8.7% of new government funding

Climate disasters and cyber attacks are leading to increased costs & destruction of infrastructure. In 2020, there were 22 U.S. climate disasters that each cost over $1 billion in damage—with a total cost of $100 billion.

Type of DisasterCost in 2020
Tropical Cyclone$57.5B
Severe Storm$35.5B
Wildfire$17.3B
Drought$4.7B

New government funding will invest in protection against cyber attacks, floods, droughts, and other climate disasters.

The infrastructure investment opportunity: Funding could boost the revenue of companies involved in cybersecurity, weatherization, environmental consultation, and construction.

6. Environmental Remediation

3.9% of new government funding

Contaminated sites are causing environmental harm or hindering land reuse, and there are more than 450,000 of them across the country. New government funding will clean up contaminated land, reclaim abandoned land mines, and plug orphaned oil and gas wells.

The infrastructure investment opportunity: Funding could boost the revenue and long-term contracts of environmental remediation companies.

Public Funding, Private Infrastructure Investment Opportunities

A boost in government funding is likely to create increased activity in private infrastructure-related areas:

  • Engineering
  • Construction
  • Materials
  • Internet Service Providers
  • Clean Energy Tech
  • Pipe Installation
  • Cybersecurity
  • Environmental Consultation

By paying attention to where the money is going, investors can consider a variety of categories that provide critical services—and capitalize on upcoming trends.

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Infographics

What Retirement Barriers do Americans Face Today?

Retirement barriers are making it difficult for people to feel good about their future. See how advisors can help in this infographic.

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What Retirement Barriers do Americans Face Today?

Today’s definition of retirement is much different than before.

It’s no longer a postscript to career, but instead a time to enjoy freedom. This could be the freedom to learn new hobbies, the freedom to travel, or the freedom to start an online business. Unfortunately, this freedom is proving to be difficult to achieve for most.

In this infographic from New York Life Investments, we discuss the retirement gap—what it is, why it exists, and how advisors can help reduce it.

What is the Retirement Gap?

New York Life Investments partnered with AARP to survey over 3,000 Americans about their retirement plans. They uncovered that across all ages, there was a gap between i) people’s perceived importance of retirement planning, and ii) their actual preparedness.

Age groupPerceived importance of preparing for retirementActual preparedness
20s77%45%
30s87%41%
40s87%40%
50s92%47%
60s93%58%
70-7484%70%

Based on a survey of 3,025 Americans aged 20-74.

These results suggest that the status quo around retirement planning isn’t working for most people. This is further supported by other survey findings. For example, 65% of respondents said they didn’t feel optimistic about retirement.

What Barriers do Americans Face?

The survey determined that Americans are struggling to overcome five retirement barriers. Let’s hear from survey respondents to learn more about them.

#1: Managing multiple priorities

Juggling between retirement savings and more immediate needs such as childcare can lead to emotional overwhelm.

”It’s difficult to put substantial money in a 401 or IRA while also paying off debt at the same time.”
– Alex B. (20s)

#2: Figuring out how much is enough

Uncertainty about how much savings is needed causes many people to avoid retirement planning altogether. The problem can simply feel too large to tackle.

”Retirement and aging are not things I look forward to, mainly because of the lack of preparation and fear of the unknown.”– Janet F. (50s)

#3: The complexity of resources

Many Americans find retirement resources are too difficult to understand. This issue is related to a lack of financial literacy, which happens to be a growing problem in the United States.

”They don’t break it down into where you can understand it.”– Amy E. (40s)

#4: Lack of representation in the marketplace

People feel that available resources are not speaking to them, or are not relevant to their life circumstances. This type of “alienation” can discourage people from seeking professional advice.

”I don’t see people who are anything like me. I see representations of upper management people…and I know that won’t be my reality.– Penni B. (60s)

#5: Don’t know who to trust

People feel that the financial industry does not have their best interests in mind. They often seek information from sources who seem more like “them.”

”I avoid professionals because I hear so many stories of financial planners who cheated people in their investments. I believe in some of the people I follow on YouTube more.”– Dino M. (50s)

Bridging the Gap

Altogether, these barriers highlight a disconnect between who the market is targeting, and who is most in need of help. Financially advisors have the power to bridge this gap by doing two things.

The first is to view investors as “customers for life”. Large firms often push advisors to work with clients who have a greater level of assets—typically those in their 40s or older. This could create a major challenge for younger generations who hope to one day retire.

For example, survey data shows that people’s expected retirement age increases as they grow older. This suggests that young adults are struggling to develop the right financial plan for their needs.

Age of respondentExpected retirement age
20s55.7
30s60.7
40s64.6
50s64.9
60s67.8

Based on a survey of 3,025 Americans aged 20-74.

By viewing investors as “customers for life”, advisors have the opportunity to steer people onto the right path at an earlier age. This can help them create positive impact in their communities, as well as grow their business through word-of-mouth marketing.

The second thing advisors can do is reach out to underserved communities. Data shows that Black and Hispanic Americans are less likely to have retirement savings, while those that do feel much less confident.

EthnicityHave retirement savingsPerceive retirement savings as being on track
White80%42%
Black63%23%
Hispanic58%22%
Asian85%47%

Source: Statista (2021)

Up to this point we’ve focused on the financial aspect of retirement, but what about health & wellness?

Redefining Retirement: Health, Wealth, and Self

The rising importance of personal health has been a major phenomenon of the COVID-19 pandemic. According to McKinsey, 48% of Americans increased their prioritization of wellness compared to 2-3 years ago.

This shift in thinking must also be reflected by retirement plans. One way to do this is to integrate health & wellness considerations alongside wealth.

For example, poor physical health can significantly drive up the costs of retirement. In fact, the average American aged 65-84 already spends nearly $17,000 per year on healthcare.

Mental health, on the other hand, can be severely affected by money-related stress. Symptoms include a loss of sleep, high blood pressure, and a negative impact on personal relationships.

Perhaps most interesting is that the relationship between health and wealth goes both ways. In other words, wealth can be a driver of better emotional and physical health. The following table shows how individuals with greater income felt better about their wellbeing.

Income levelConsider themselves to be emotionally healthyPhysically healthy
Under $40K50%47%
$40K - $75K63%56%
$75K - $100K68%63%
Over $100K73%68%

Based on a survey of 3,025 Americans aged 20-74.

To develop a more holistic retirement plan for their clients, advisors must transform from financially focused representatives to holistic life coaches.

Barriers are Meant to be Broken

With the concept of retirement, many Americans feel like they are on the outside looking in. They suffer from a lack of representation, a mistrust for the financial industry, and have few resources that are catered to them.

What’s needed is a democratization of retirement planning.

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Infographics

Four Tips to Protect Portfolios in a Rising Rate Environment

Is inflation here to stay? Here are four investment strategies to keep in mind when prices are rising—and the data behind why they work.

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Investment Strategies

This infographic is available as a poster.

Four Tips to Protect Portfolios in a Rising Environment

U.S. inflation hit a 40-year high in November, rising 6.8% on a year-over-year basis.

Gas prices have jumped 58%, used cars are up 31%, and the price of food has risen over 6% over the same time frame.

But whether inflation is short-lived or here to stay remains up in the air. In this infographic from New York Life Investments, we take a look at four investment strategies to help investors manage risk during a rising environment.

1. Prepare for Inflation

Why it works: In an inflationary environment, one strategy is to identify companies that can both pass on rising costs and those that benefit when prices are rising.

Often, these companies possess:

  • Strong brands
  • Monopoly pricing power
  • Strong margins

Here are industry groups that could stand to benefit the most when the market expects inflation to rise:

  • Banks
  • Energy
  • Autos & Components
  • Capital Goods
  • Financials

Banking and financials have greater pricing power and can increase their prices when inflation rises. Cyclical industries, such as energy and capital goods—also known as industrials—also tend to outperform as their prices are linked to the Consumer Price Index.

2. Look for Solid Fundamentals

Why it works: Inflationary environments affect real returns. To combat this, look for strong fundamentals that help drive performance.

Across a study of 2,258 firms over 15 years, companies that performed the highest on these two variables generated over two times the returns of average firms.

Revenue Growth & Economic Profit Growth Total Returns to Shareholders
Highest Quintile19.0%
Mid-Tier Quintile8.5%
Lowest Quintile-1.0%

The research comprises data for 2005-19. Based on top 2,258 U.S. companies by market capitalization in 2019 (excluding financial sectors). It excludes companies with negative average economic profit in 2005-09.
Source: Corporate Performance Analytics by McKinsey, S&P Global (Oct 2021)

Separately, findings show that companies who focus on long-term growth and economic profit also typically created more value and job creation.

That’s why stock selection is critical. Investors can access these types of stocks through a range of actively managed strategies such as ETFs, multi-asset funds, and mutual funds.

3. The Data Behind Long-Term Investing

Why it works: Based on 148 years of S&P 500 Index return data, the odds of losing money in U.S. large-cap stocks significantly decreases over the long run.

Investment Horizon% of Investor Loss Over Time (Inflation-Adjusted)
1 Month39.3%
1 Quarter37.1%
1 Year30.9%
3 Year22.1%
5 Year19.5%
10 Year11.5%
20 Year0.1%

Analysis based on rolling periods for S&P 500 Index January 1871- March 2020
Source: Robert Shiller, Schroders (Apr 2020)

Over a one month period, there is a 39% chance of losing money—but this plummets to 0.1% over 20 years. Even during a rising environment, staying invested over a longer period of time helps manage risk when compared to shorter-term periods.

4. Avoid Common Investing Mistakes

Why it works: Being aware of common mistakes can prevent investors from missing out on significant return opportunities or expose them to greater risk.

Since inflation can be unpredictable, investors can take note of some practices that they can control, as shown in the investment strategies above. By the same token, here are the top four to avoid:

Investment MistakeMost Common MistakeConsidered the Worst Mistake
Attempting to Time the Market42.5%51.9%
Lacking Portfolio Diversification26.0%16.7%
Not Addressing Tax Implications15.1%9.6%
Forgetting to Rebalance Portfolio7.5%4.5%

According to a survey of financial advisors
Source: SmartAsset (May 2021)

Not only was market timing the most common mistake, it is considered the most detrimental. In fact, timing the market led to 71% more volatility compared to buy and hold strategies over a 30 year period.

Investment Strategies for the Year Ahead

Backed by a broad set of data, these investing tips can help investors focus on the big picture during a rising environment. Regardless of the market, these investment strategies can help build confidence and help to better manage portfolio risk.

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