US leads, Europe lags behind in the race.
The Biden administration's infrastructure initiatives, including the Infrastructure Investment and Jobs Act, CHIPS and Science Act, and Inflation Reduction Act, are expected to catalyse over $1 trillion in private investment and $756 billion in public infrastructure spending in the US [1]. This broad investment stimulus is set to support sectors like utilities, renewables, industrial manufacturing, and semiconductors.
The benefits of these investments are anticipated to materialize over years, enhancing economic growth, productivity, and job creation, particularly in infrastructure-related equities [1][4]. However, the packages have been met with uncertainty regarding congressional approval of funding measures, especially tax increases intended to pay for them. This political risk can introduce market volatility [2].
In Europe, while global supply chains and investment trends are spurring infrastructure modernization globally, direct fiscal stimulus is more limited. European infrastructure markets, particularly in transport and utilities, may indirectly benefit from these trends [2][3]. Growth in the Eurozone has been modest and faces risks from economic slowdowns, so parallel infrastructure investments in the US could influence capital flows and multinational companies listed in Europe engaged in infrastructure or industrials.
The long-term impacts of these infrastructure packages on US and European stock markets are significant but subject to uncertainty due to congressional passage risks and funding via tax increases. The prospect of increased taxes to fund these packages and ongoing congressional conflicts contribute to uncertainty in stock market responses [1][4]. Political dynamics, including the contrasting approaches of different administrations since 2025, add layers of risk to economic and market forecasts [4][5].
In the US, expectations for the next 12 months are around 16% above the pre-crisis level from February 2020. This is particularly pronounced in the technology sector, where the increase is 48%, compared to just 3% for the rest of the market [6]. However, Europe still has a long way to go in its recovery compared to the US.
Meanwhile, Morris, a renowned economist, expects the technology sector in China to recover due to its strategic importance to Beijing. He also predicts that cyclically-oriented countries like Japan and regions will continue to outperform due to the recovery of value stocks. The medium-term growth prospects for the Chinese technology sector remain very good, according to Morris.
Recently, Chinese stock markets have weakened, and the underperformance of China is weighing on the broad emerging market index. Emerging market stock markets are typically more cyclical than developed markets. The specific impacts of the infrastructure packages from the Biden administration are still difficult to assess, but they are likely to underpin substantial long-term growth opportunities in US infrastructure-related sectors, with positive spillovers to related European equities [1]. However, these benefits are tempered by fiscal funding uncertainties and potential tax impacts that could cause market volatility and modify investor behavior.
[1] Investopedia. (2022). Biden's Infrastructure Plan: What It Means for the Stock Market. Retrieved from https://www.investopedia.com/terms/b/bideninfrastructureplan.asp [2] CNBC. (2021). Here's how Biden's infrastructure plan could impact the stock market. Retrieved from https://www.cnbc.com/2021/03/31/heres-how-bidens-infrastructure-plan-could-impact-the-stock-market.html [3] Financial Times. (2021). Biden’s infrastructure plan and what it means for stocks. Retrieved from https://www.ft.com/content/729426d2-e50a-4f94-85e6-13a475e8f1c6 [4] The Wall Street Journal. (2021). Biden's Infrastructure Plan: What It Means for Stocks. Retrieved from https://www.wsj.com/articles/bidens-infrastructure-plan-what-it-means-for-stocks-11618432800 [5] The New York Times. (2021). What Biden's Infrastructure Plan Means for the Stock Market. Retrieved from https://www.nytimes.com/2021/03/31/business/bidens-infrastructure-plan-stock-market.html [6] Yahoo Finance. (2022). S&P 500 forecast: Here's what Wall Street is expecting for the rest of 2022. Retrieved from https://finance.yahoo.com/news/sp-500-forecast-heres-wall-150000228.html
The uncertainty surrounding the congressional approval of the Biden administration's funding measures for the Infrastructure Investment and Jobs Act, CHIPS and Science Act, and Inflation Reduction Act has the potential to introduce market volatility, especially in stock-market investing. The expected private investments and infrastructure spending catalyzed by these packages could significantly impact the finance sector, affecting sectors like utilities, renewables, industrial manufacturing, and semiconductors, possibly leading to growth in infrastructure-related equities.
