“So far in 2025, we see a moderating growth, inflation and rate outlook, with Trump 2.0 as the main wildcard for markets. For the US, while Trump’s core policies are pro-growth there is now a greater degree of uncertainty, bigger downside risk and a wider range of possible economic outcomes,” Ms Shaw said.

“Trump’s main campaign policies and threats are known, that is, tariffs, taxes, immigration and deregulation. However, as we’ve seen in the past week regarding tariffs, the degree of implementation and timings remain fluid. Medium term, these initiatives could see a scenario of higher nominal US growth, elevated inflation, and favourable domestic drivers for corporate earnings, but tempered by the potential downside risks from global trade tensions and geopolitical instability.” 

Most concerning are Trump’s tariff plans, which Ms Shaw says are at the headline the largest tariffs since the 1930s, and customs duties seven times those of the Trump 1.0 trade wars of 2017-19. 

“These headline tariffs, if implemented as suggested, could have a stagflationary impact on the US economy, leading to lower growth and higher inflation at the same time.

“However, there is a very wide range of potential outcomes. Tariffs are a tax on imports, which will slow economic activity as demand slows. Firms may pass on tariff-related expenses to the end consumer, resulting in a kick-up in inflation,” she said.

“This will add to geopolitical uncertainty. Tariffs are likely to be used as weapons of foreign policy, and the level of retaliatory tariffs could also have significant economic and geopolitical consequences. These have the risk of flowing through to renewed supply chain disruptions, which could bring upside risk to inflation globally,” she said.

Despite these uncertainties, Ms Shaw is optimistic about the long-term fundamentals underpinning infrastructure companies. 4D Infrastructure is positioning its portfolio to capitalise on long-term growth dynamics in the infrastructure sector, which include developed market replacement spending, population growth, the rise of the middle class in developing economies, the clean energy transition and rise of technology.

4D is targeting companies globally, with assets across developed Asia, Europe and North America, as well as emerging markets offering appeal. 

“With market and economic trends currently diverging, certain regions offer greater relative value at present, and we are positioning for this. With the risk and opportunity of Trump incorporated into forecasts, we start 2025 overweight Europe and emerging markets with selective positioning in the US awaiting greater clarity. Overall, infrastructure remains an attractive asset class for investors, given its unique characteristics such as inflation pass-through, resilient earnings and exposure to long-term growth,” she said.

“We will be monitoring regional economics and politics closely and positioning ourselves to best weather these at an in-country level.”

4D is increasingly wary of sectors and companies that have run ahead of fundamental value on sentiment and/or ‘blue sky’ value while also limiting exposure to sectors/companies involved in political machinations such as US offshore wind.  

By contrast, they have increasing conviction in companies and sectors that were oversold in 2024 including Brazil, parts of China & European assets. 

“European and UK utility investment plans look particularly attractive as they are supported by strong sector growth thematics. European user pays also continue to offer value. While volume growth is mitigating, it remains solid, and the strong cash generation and growing shareholder returns are attractive in the current muted economic environment,” Ms Shaw said.

“We also remain selective in our exposure to China, capitalising on those names that can benefit from any stimulus as well as a slowly recovering sentiment,” she said.

“In Latin America, Mexico is at risk of Trump 2.0 and we are limiting exposure to those names that have low exposure to tariffs, can capitalise on a weakening currency and are not on the radar of the new Mexican government, namely the airport space. 

“In Brazil, growth and inflation expectations surprised to the upside in 2024 and the reversal of the rate trajectory to a tightening territory amid fiscal policy concerns had a significant impact on sentiment for the infrastructure names. As a result, 2024 was a very weak year for Brazilian infrastructure equities which is at a complete disconnect with fundamentals – they all have an inflation hedge and many a GDP link which were both very supportive.

“Elsewhere around the globe we continue to monitor geopolitical risk and opportunity, the economic outlook as well as capitalise on long term, structural growth thematics that underpin the infrastructure investment story,” Ms Shaw said.

By Sarah Shaw