US infrastructure is crumbling: Implications for investors


Nov. 20 2020, Updated 3:29 p.m. ET

BlackRock Chairman and CEO Larry Fink reveals how one of the nation’s greatest challenges could also be the next big investment opportunity.

Have you ever driven up I-95 on a weekend?  Tried living in Los Angeles without a car?  Taken a train directly to JFK airport?  Oh, wait—you couldn’t even do that last one, because it doesn’t exist.  Infrastructure in the U.S. is dismal—whether it’s crumbling roads, underfunded public transportation networks, or less visible things like power grids and sewer systems.

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Market Realist – The above graph shows the gaps in the historical actual spending and estimated future spending on infrastructure as a per cent of gross domestic product or GDP in developed market economies (VEA) like the U.S. (SPY), UK (EWU), Germany (EWG), Australia (EWA), France (EWQ), Canada (EWC), Sweden (EWD), and Japan (EWJ).

The U.S. (IVV) has the highest negative gap (1% of GDP) among developed nations.

Market Realist – The graph above shows the percentage of structurally deficient and functionally obsolete bridges in the U.S. in some of the worst-affected states.

According to the National Bridge Inventory, 63,000 U.S. bridges are structurally compromised. But vehicles cross them around 250 million times daily.

The U.S., on average, experiences 240,000 water main breaks every year, as estimated by ASCE. This trend shows an aging and overstrained infrastructure system.

Market Realist – The graph above shows the results of a survey conducted by Urban Land institute and Ernst and Young. As per the findings of the institute, some of the key areas that Americans gave top priority to include improvements in public transit services, improved roads and bridges, better water and waste water infrastructure, and better energy (XLE) and healthcare (XLV) infrastructures.

The American Society of Civil Engineers (or ASCE) awarded grade D+ to the U.S. infrastructure system in 2013. According to ASCE, a D grade is defined as “below standard with many elements approaching end of productivity.” The condition and capacity of systems graded D are a cause for concern, as they have a strong risk of failure.

The state of U.S. infrastructure is indeed deplorable. The country needs to see significant changes in this sector.

Read on to the next part of this series to see why aging infrastructure can cost the economy.


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