Home Insights Listed infrastructure Global Listed Infrastructure Annual 2024 Outlook

Global Listed Infrastructure Annual 2024 Outlook

January 22, 2024
Emily Foshag, CFA
Portfolio Manager, Listed Infrastructure
Nina Liu, CFA
Portfolio Specialist, Listed Real Assets
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Summarizing our outlook

Listed infrastructure experienced challenging trading conditions in 2023.

More resilient economic data ultimately pushed back market expectations of timing for both peak interest rates, as well as the potential for rate cuts. The consensus macro call shifted from recession to soft landing. These dynamics led stocks typically perceived as interest rate sensitive and defensive to materially underperform.

The good news is that today’s listed infrastructure valuations offer an attractive entry point, with the asset class trading cheap relative to both broader global equities and unlisted infrastructure.

Valuations versus equities screen near levels seen during the Global Financial Crisis, and listed infrastructure trades at an estimated 30 percent discount to the latest available unlisted infrastructure transaction data.

We also expect 2024 will bring a combination of decelerating growth and inflation that exceeds long-term averages, a backdrop that has historically been positive for the relative performance of listed infrastructure.

If a deeper recession does materialize, history tells us that most risk assets—including listed infrastructure—would experience short-term selling pressure, but more defensive equity assets like infrastructure should outperform.

Alongside attractive valuations and a more supportive macro environment, we expect the fundamentals of listed infrastructure businesses to remain solid in the year ahead.

The fundamental performance of listed infrastructure companies could also begin to appear increasingly differentiated as the consumer weakens.

2024 should present ample opportunities to generate excess returns from stock picking.

Within listed infrastructure, our portfolios have already been benefitting from several pockets of dislocation that we felt had created scope for mean reversion, even in sectors with exciting fundamental dynamics. We also believe the pessimism reflected in select Chinese infrastructure stocks may now be overdone.

Moving beyond the immediate future, the long-term outlook for listed infrastructure remains attractive.

We have high conviction that fundamental growth drivers for listed infrastructure companies will remain tailwinds that will outlast today’s macro concerns.

Our long-term outlook for listed infrastructure remains constructive as the fundamental growth drivers for these companies are poised to outlast today’s macro concerns. To read our full perspective, download Principal Global Listed Infrastructure 2024 Outlook.

Listed Infrastructure
Disclosure

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Risk Considerations
Investing involves risk, including possible loss of Principal. Past Performance does not guarantee future return. All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.

Infrastructure issuers may be subject to regulation by various governmental authorities and may also be affected by governmental regulation of rates charged to customers, operational or other mishaps, tariffs and changes in tax laws, regulatory policies and accounting standards. Foreign securities involve special risks, including currency fluctuations, lower liquidity, political and economic uncertainties and differences in accounting standards. Some international securities may represent small and medium-sized companies, which may be more susceptible to price volatility and may be less liquid than larger companies.

Important information
This material covers general information only and does not take account of any investor’s investment objectives or financial situation and should not be construed as specific investment advice, a recommendation, or be relied on in any way as a guarantee, promise, forecast or prediction of future events regarding an investment or the markets in general. The opinions and predictions expressed are subject to change without prior notice. The information presented has been derived from sources believed to be accurate; however, we do not independently verify or guarantee its accuracy or validity. Any reference to a specific investment or security does not constitute a recommendation to buy, sell, or hold such investment or security, nor an indication that the investment manager or its affiliates has recommended a specific security for any client account.

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All figures shown in this document are in U.S. dollars unless otherwise noted.

This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.

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MM13856 | 01/2024 | 3319251-012025
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