3 Things Investors Need To Know About The $4 Trillion Infrastructure Plan: Part 2

NYSE: SPY | SPDR S&P 500 ETF Trust News, Ratings, and Charts

SPY – Today’s Part 2 of 3 article features the SPY & reveals “3 Things Investors Need To Know About The $4 Trillion Infrastructure Plan.” Read on to find out.

In part 1 of this series, we saw how the $4 trillion in infrastructure spending Congress is currently working on could, according to Moody’s, fuel 1% stronger GDP growth through 2031 and help create 19 million jobs.

Here in part 2, we’ll examine what this potentially stronger economic growth means for corporate earnings and the stock market.

Fact 3: How $4 Trillion In Infrastructure Could Boost Corporate Profits And The Stock Market

In the long run…each 1% move in U.S. GDP growth should translate into roughly 3% to 4% growth in the earnings of S&P 500 companies.” – Bank of America

According to Bank of America’s economists (also part of the blue-chip consensus), 1% faster GDP growth translates into about 3.5% faster corporate earnings growth over time.

Today the bottom-up consensus long-term EPS growth forecast from FactSet is 8.5% CAGR. Historically, analysts tend to overestimate by 2% to 3%, and adjusting for the historical probability of recession (14%) that would be 6.4%.

(Source: FAST Graphs, FactSet Research)

Including the pandemic and post-pandemic recovery, earnings have grown at 8.5% CAGR for the last four years, and that’s what analysts expect to continue.

If the economy were growing 1% faster, as Moody’s expects if the $4 trillion infrastructure bills pass, then earnings growth could potentially jump to 11.5% to 12.5% CAGR through 2031.

That could have massive implications for your portfolio.

Why Infrastructure Could Be A Game Changer For The Stock Market And Your Portfolio

For context, here’s the return potential of the 29% overvalued S&P 500.

S&P 500 2023 Consensus Total Return Potential

(Source: FAST Graphs, FactSet Research)

S&P 500 2026 Consensus Total Return Potential

(Source: FAST Graphs, FactSet Research)

But here’s what happens if 1% faster GDP growth drives 3% to 4% faster EPS growth.

S&P 500 2026 Consensus Total Return Potential (3% Faster Growth)

(Source: FAST Graphs, FactSet Research)

S&P 500 2026 Consensus Total Return Potential (4% Faster Growth)

(Source: FAST Graphs, FactSet Research)

7% to 8% annual returns is basically is what the market has historically delivered, and despite the market being 29% overvalued, it could deliver historical returns if the $4 trillion infrastructure bills live up to Moody’s expectations.

But wait it gets better!

The average market pullback is 7% and the average correction is 14%.

We’re now historically overdue for a pullback, and Bank of America expects a correction this year due to high market valuations.

So let’s take a look at what happens to expected 5-year total returns for stocks after both a historically average pullback, and correction, if the economy is growing 1% faster and corporate earnings 3% to 4% faster.

S&P 500 2026 Consensus Total Return Potential (3% Faster Growth And a 7% Pullback)

(Source: FAST Graphs, FactSet Research)

S&P 500 2026 Consensus Total Return Potential (3% Faster Growth And a 7% Pullback)

(Source: FAST Graphs, FactSet Research)

A historically normal pullback or correction, combined with 1% faster economic growth could help the market deliver historically normal and attractive returns over the next five years.

And if the market returns to fair value? That requires a 21% bear market, such as we saw in 1990.

What would the market’s returns look like if the $4 trillion infrastructure boosts GDP growth by 1% over the next decade?

2% yield + 11.5% to 12.5% EPS growth = 13.5% to 14.5% CAGR.

In other words, $4 trillion in infrastructure spending could not only minimize the chances of a severe bear market this decade, but it could help fuel an epic 20-year bull market that allows the market to rise 500% or 6X from the March 2009 lows.

But while that’s great news for index investors, what if you’re looking for individual stocks to profit from the potential $4 trillion infrastructure gold rush?

In parts three and four of this series, coming next week, we’ll look at some blue-chip bargains that could soar if infrastructure passes, and could help you achieve returns strong enough to deliver the rich retirement you deserve.


SPY shares were trading at $445.45 per share on Friday morning, up $0.34 (+0.08%). Year-to-date, SPY has gained 19.92%, versus a % rise in the benchmark S&P 500 index during the same period.


About the Author: Adam Galas


Adam has spent years as a writer for The Motley Fool, Simply Safe Dividends, Seeking Alpha, and Dividend Sensei. His goal is to help people learn how to harness the power of dividend growth investing. Learn more about Adam’s background, along with links to his most recent articles. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
SPYGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Holiday Stock Rally is an “Optical Illusion”

Holiday sessions like this week have a naturally bullish bias for stocks (SPY). That’s because the joy of Thanksgiving typically leaks over to higher stock prices. The risk is giving this upward movement any significance when the long term trajectory is still decidedly bearish. Let’s do a roll call of recent events that continues to point the compass to more downside action ahead along with our game plan to profit as stocks make new lows in the weeks ahead.

:  |  News, Ratings, and Charts

3 Upgraded Stocks to Check out This Week

Equities have jumped recently on hopes that the Fed will soon begin to slow its rate hikes as inflation shows signs of easing. However, the year-end market rally is expected to meet the recession reality in 2023. Amid an uncertain market outlook, investors should consider buying fundamentally strong stocks Cisco (CSCO), Bridgestone (BRDCY), and KT Corporation (KT), which have been recently upgraded in our proprietary rating system. Keep reading…

:  |  News, Ratings, and Charts

The Best Software Stock to Buy in November and the Worst

With inflation showing signs of cooling, the Fed is expected to slow down its rate hike aggression in the coming months. This might bode well for the tech and software industry. Moreover, amid rapid digitization, the growth prospects of the software industry should remain solid. Thus, quality software stock Commvault Systems (CVLT) might be an ideal buy for November. However, we believe fundamentally weak Robinhood (HOOD) might be best avoided. Keep reading…

:  |  News, Ratings, and Charts

2 Stocks to Sell Before They Bleed More Cash

The benchmark indexes witnessed a freefall this year amid deteriorating investors’ sentiments. Therefore, amid widespread recession concerns and a poor global economic growth outlook, we advise our investors to avoid already hard-hit and fundamentally weak stocks Snap (SNAP) and Pineapple Energy (PEGY). Read more...

:  |  News, Ratings, and Charts

The Best Software Stock to Buy in November and the Worst

With inflation showing signs of cooling, the Fed is expected to slow down its rate hike aggression in the coming months. This might bode well for the tech and software industry. Moreover, amid rapid digitization, the growth prospects of the software industry should remain solid. Thus, quality software stock Commvault Systems (CVLT) might be an ideal buy for November. However, we believe fundamentally weak Robinhood (HOOD) might be best avoided. Keep reading…

Read More Stories

More SPDR S&P 500 ETF Trust (SPY) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SPY News