The Global X US Infrastructure Development ETF (PAVE) has emerged as a notable performer in the financial markets over the past few years. With its ability to keep pace with the S&P 500 in 2023, PAVE has garnered attention as a potential source of meaningful outperformance in the coming months. In this article, we delve into the factors contributing to PAVE’s strength and its prospects for continued growth.
Portfolio Composition: Leveraging Infrastructure Development
PAVE primarily consists of industrial and materials stocks, strategically positioned to capitalize on U.S. infrastructure development and improvement projects. As the government focuses on rebuilding America through infrastructure initiatives, PAVE stands to benefit from the increased investment in construction and related sectors.
Government Initiatives: Driving Infrastructure Projects
Two years after President Joe Biden signed a $1 trillion infrastructure bill into law, his administration has launched an extensive array of projects aimed at revitalizing the nation’s infrastructure. Led by infrastructure czar Mitch Landrieu, the government has announced over $400 billion in projects, covering various sectors such as airports, bridges, roads, electric vehicle charging stations, and broadband expansion.
Long-Term Uptrend: Technical Analysis of PAVE
In terms of technical analysis, PAVE exhibits a long-term uptrend, supported by accelerating upside momentum across different timeframes. The weekly MACDThe MACD indicator is essentially a momentum indicator that shows the relationship between two different moving averages of price. The MACD is the difference between the 12-period ... More, used as an indicator of intermediate-term momentum, illustrates this trend with expanding histogram bars. Recent price action has cleared both short and long-term overbought signals, indicating potential for further upside in PAVE’s trajectory.
Technical Targets and Support Levels
Despite its recent rally, PAVE still has room to climb higher, with no significant resistance levels evident on the chart and no sell signals present. Measured move projections suggest a technical target near $40 in the intermediate term and around $42 in the long term. Initial support levels are defined by previous resistance levels, particularly around $35, with the 50-day moving average serving as a potential stop-loss threshold.
Relative Outperformance: Comparing PAVE to the Market
In relative terms, PAVE has demonstrated outperformance since 2020, as evidenced by its ratio versus the S&P 500. Although the ratio consolidated in 2023, recent momentum has been reignited following a breakout from a triangle formation in December. This suggests that PAVE may continue to outperform the broader market in the months ahead, as the multi-year uptrend in the ratio resumes its upward trajectory.
Conclusion: PAVE’s Potential for Continued Growth
In conclusion, the Global X US Infrastructure Development ETF (PAVE) remains well-positioned to capitalize on ongoing infrastructure initiatives and drive further growth in the coming months. With supportive government policies, a favorable technical outlook, and a history of relative outperformance, PAVE offers investors an opportunity to participate in the resurgence of the U.S. infrastructure sector. As construction projects unfold and economic momentum builds, PAVE stands poised to deliver continued strength and potential outperformance in the financial markets.
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