SIMS - Peak Rates A Good Sign For Infrastructure

2024-05-31 12:30:43 ET

Summary

• Infrastructure has historically outperformed global equities as interest rates have peaked.
• Infrastructure assets offer meaningful capital upside and have long-term thematic drivers, such as decarbonization and AI.
• We expect infrastructure dividends to grow annually, and the sector has defensive qualities that shine in economic slowdowns.

By Shane Hurst, Portfolio Manager

Infrastructure Outperformance Doesn't Need Falling Rates

Higher bond yields have weighed on infrastructure stocks of late, whose dividends must compete with bonds for income investor capital, and which typically require a lag in passing through higher costs from interest rates to allowed returns (for regulated assets such as utilities) or long-term contracts (for user-pays assets such as toll roads and airports). Yet infrastructure has historically outperformed global equities as interest rates have peaked, something to keep in mind as inflation indicators slow and allow major central banks to end their hawkish positioning and move toward easing....

For further details see: