Sarah Shaw

Despite economic and trade policy uncertainty and a disruptive geopolitical landscape, infrastructure assets remain well positioned heading into 2026, according to Sarah Shaw, CEO and global portfolio manager at 4D Infrastructure.

In 4D’s recently released Global Matters – 2026 outlook Shaw says there is a sense of ‘controlled uncertainty’ for investors at the start of 2026, but infrastructure remains one of the few asset classes offering both resilience and selective growth.

“Infrastructure allows diversification across user pays and regulated assets, meaning investors can take advantage of different opportunities across regions while still being cognisant of the nuances of political and monetary policies. Infrastructure’s blend of inflation linked revenues, contracted cash flows, and regulated return frameworks provides ballast for investors’ portfolios, while still offering cyclical upside where domestic demand, growth thematics and policy support are strongest.”

Looking ahead, Shaw says that globally, policy uncertainty, trade rewiring, and geopolitics is keeping risk levels for investors relatively high, but not decisively bearish, and solid global growth remains the base case.

“Overall, we believe there is sufficient growth to support earnings and investment plans, even if there are more potential policy surprises and variations between regions that will create further volatility in the global market,” she says.

AI, global trade, fiscal stance and geopolitics remain key economic themes for infrastructure in 2026, says 4D Infrastructure investment director, Tim Snelgrove.

“Investment in AI is set to continue to increase in 2026. It is estimated that in the US alone tech capex is forecasted to reach US$500 billion this year. This is driving a lot of construction-led activity in the market to accommodate the power capacity requirements needed to service increasing demand for AI. However, this narrative could quickly turn from tailwind to headwind if the availability and affordability of power, and debt funding models and returns get stretched,” Snelgrove says.

Trade and tariff uncertainty also remains, particularly for global supply chains.

“Peak fear in markets has passed following the introduction of President Trump’s tariffs in April 2025. However, the full implication of tariffs may only come into light this year, especially if existing transshipment workarounds are curtailed,” says Snelgrove.

In bond markets, term premiums are keeping long term bond yields high, despite the Fed continuing its easing cycle into 2026.

“The USD remains under pressure due to persistent policy uncertainty. In addition, the ‘TACO trade’ persists – as seen again last week on the matter of Greenland.

“Elsewhere, Germany’s fiscal loosening and heavier issuance has steepened bond curves, while Japan’s stimulus has pushed yields to multi decade highs,” he says.

Conflicts from the Ukraine to the Middle East remain potential catalysts, but the November US midterms will be a major focus this year, says Snelgrove.

“History suggests the sitting President’s party tends to lose House seats, and with a razor thin majority that raises the probability of a divided government. The question is whether the Trump Administration seeks to dampen volatility into November or escalates disruptive proposals,” says Snelgrove.

Despite these uncertainties, the case for global infrastructure assets remains strong, as it offers global, multi sector diversification, enabling active positioning by region and cycle.

“In a world of high term premiums, an uneven inflation outlook, and episodic policy shocks, we favour three broad areas in the market: regulated networks with approved investment roadmaps & constructive regulation across Europe, North America & EMs, selective user-pays assets in stable policy environments, and targeted emerging market exposure where regulation or long-term concessions provide insulation from macro volatility.”

“While near-term uncertainty will persist, we remain optimistic about the long-term fundamentals underpinning global infrastructure,” Shaw says.

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Sarah Shaw

The new Trump Administration in the US is a major wildcard for the year ahead, both economically and geopolitically, with implications home and abroad.

Whilst Trump’s main campaign policies and threats are known (tariffs, taxes, immigration, deregulation), the degree of implementation and timing are still fluid.

Overall, these factors suggest a scenario of higher nominal U.S. growth, elevated inflation, and favourable domestic drivers for corporate earnings, tempered by the potential downside risks from global trade tensions and geopolitical instability. Outcomes are very uncertain with higher downside risk. 

Tariffs

The impact of tariffs is stagflationary on the US (lower growth and higher inflation) but 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; however, this may be short-lived if tariffs are reduced in the future.

The timing and size of tariffs are still uncertain, as is the degree of bilateral negotiations and sector exclusions. The current headlines are opening gambits and form part of Trump’s broader negotiating strategy, all with the aim of increasing FDI and manufacturing activities into the US. Trump’s biggest targets are those countries with large goods trade surpluses with the US, which include China, Mexico, Canada and Europe. 

We expect a China tariff to be implemented in late 2025, with a universal baseline tariff (UBT) in 2026, but with several exclusions and amendments in place. There is less clear footing on the implementation of the UBT and there is the widespread expectation based on input from Trump advisors that Trump will use the threat of the 10% tariff to negotiate concessions with major trading partners, rather than imposing them indiscriminately. 

It is important to consider how US trading counterparties react to tariff proposals and negotiations (e.g. Australian permanent exemption from Trump’s 25% steel/aluminium tariffs in 2018).

As to impacts on countries, a 10% UBT will hit Europe 0.5-1% GDP growth, with the biggest hit in Germany. Trump has also proposed larger tariffs on European autos, further hurting Germany. Weaker exchange rates will act as a safety valve for EM exporters facing US import tariffs. The biggest impact in the EM is on Mexico (0.5% GDP) due to its supply chain integration with the US. Longer term manufacturing orientated EMs (Vietnam and Mexico) could benefit from a shift by Western firms pulling production out of China. The first trade war had little impact on aggregate export performance in China, as third party countries replaced US destinations and with CNY depreciation. This time round, any weakness should be met with additional Chinese stimulus in line with its gradual approach of stimulus and meeting annual growth targets.

Deregulation – Energy and IRA
 

Trump’s campaign trail was pro fossil fuels and against renewable build out.
Trump is supportive of domestic oil and gas production, as well as undoing Biden’s pause on new LNG export terminals. The pause only applies to projects that would come online at the end of the decade, so the effect on natural gas prices will be negligible in the short term. Several liquification terminals, that already have approval to export, are scheduled to begin operations over the next few years.

By contrast, Trump has threatened to repeal the Inflation Reduction Act (IRA), but there is a high degree of unknowns as to what and how much can be done. A full repeal is less likely because of the large amount of IRA related investments made in Republican dominated districts. According to the Department of Energy, of the total spending on clean energy technologies since 2021 (as of mid-2024), ~$10.9 billion was for solar in red states and $4.1 billion in blue states, spending on batteries was $109.9 billion in red states and $22.0 billion in blue states, and spending on EVs was $35 billion in red states and $4.2 billion in blue states. However, it is clear that the near term rhetoric is negative with comments such as “no windmills” impacting sentiment.

Immigration

Trump’s threatened immigration agenda is very aggressive, including deporting 15-20 million people immediately and stricter border controls. Trump will most likely repeal Biden’s “humanitarian parole”, which is bringing in 75 thousand people monthly into the US with the ability to work after 30 days – this will cut off a major source of labour force growth and be potentially inflationary. Immigration has been an important tailwind to recent US growth having been about 2 million above trend in recent years. Net immigration reducing to near zero and deportations of undocumented migrants should reduce the US labour supply by 0.1-0.2%. It is also important to note that Trump 1.0 ran on mass deportations, but the pace of his deportations were actually lower than Obama.

Taxes

Trump’s other policies are domestic growth focused, with tax cuts giving consumers further tailwind and a push to re-invigorate the domestic manufacturing base and re-shore facilities back to the US. The negotiation around the 2017 Tax Cuts and Jobs Acts (TCJA) looms large in 2025, and the potential economic impacts on fiscal policy are more likely to be felt in 2026.

These tax cuts are at the cost of widening the fiscal deficit and estimated to add nearly USD $5-10 trillion to overall debt over the next decade, even with the offsetting gains from government efficiency and tariffs. Rising net interest payments continue to increase and there is little fat to cut from the budget (only 14% is discretionary non-defence spending to trim) – this could lead to discomfort in the bond market.

 The bond market is likely to be more important to Trump 2.0 considering the current levels of debt and intended fiscally expansive policies. Ahead of his first win, the 10-year treasury yield was ~1.8%, the US federal deficit around 3% of GDP, and the outstanding debt ~75% of GDP. Today, those numbers are ~4.4% on Treasury yield, and ~7% & nearly 100% of GDP, respectively. There is a risk of the ‘bond vigilantes’ returning to the US should the fiscal deficit and trajectory get reckless.

Timeframe and risks

Considering the many parts of Trump’s agenda, a number of conflicting dynamics mean there is a wide range of distribution of risks around outcomes, with what we believe a fatter tail risk to the downside.

We expect a focus on immigration in the first 100 days (border security, deportations, reverse Biden’s humanitarian visas). There should be tariff noise all of 2025, with China tariffs implemented in the second half of the year and UBT introduced in 2026. Tax cuts should be extended by the end of 2025.

There are still some controls over Trump’s policies, which should rationalise outcomes. His immigration and tariff plans can largely be implemented through executive action, whereas his regulatory rollback can proceed more rapidly with Congressional cooperation, and his tax plans are entirely dependent on Congress. Congress controls the US budget, and has sole authority to pass legislation (required for tax cuts). Even a Republican sweep will exercise a level of control, even on the most extreme aspects of policies (e.g., a Republican Senate did reject extreme Fed nominees in Trump’s first term).

By Sarah Shaw, CIO and Tim Snelgrove, investment director)

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Tim Snelgrove

Central bank interest rate cuts are a tailwind for infrastructure assets, especially parts of the utility sector which has been hard hit by the sharp rise in interest rates, according to Tim Snelgrove, investment director with 4D Infrastructure. 

While Mr Snelgrove expects interest rates to remain higher throughout the first half 2024, he expects central banks across the developed world to be cutting in the second half of the year given the recent cooling of inflation and a slowing global growth outlook. In the last month the market has started moving towards a similar expectation having started the year too optimistic on the quantum and pace of cuts. 

“We feel the market may be too aggressive with over 150 basis points of cuts priced in at the end of December for the Federal Reserve, European Central Bank and Bank of England. Considering higher structural inflation and budget deficits, long bond rates should remain elevated, at more than 3.75 per cent to 4 per cent for 10-year Treasurys.  

“Any official interest rate cuts, however, would support infrastructure assets, especially utilities. We expect interest rate cuts to start in the second half of the year and lower rates will support long duration infrastructure assets, which we forecast will continue to enjoy strong earnings growth, driven by multi-decade thematics,” said Mr Snelgrove. 

4D Infrastructure notes five long-term growth dynamics that are completely immune to short-term events. Developed market replacement spend, global population growth, the emergence of the middle class, the energy transition and the rise of technology are all underpinning infrastructure investment, positioning it well for the long term. 

According to Sarah Shaw, global portfolio manager and CIO of 4D Infrastructure: “Many developed nations need to replace old and inefficient infrastructure. Separately, robust global population growth in emerging nations is forcing up infrastructure spending. The emergence of middle classes too in developing economies like India and LatAm offers a huge opportunity with infrastructure, both as a driver and a first beneficiary of improved living standards.” 

The transition to renewable energy is another tailwind for the infrastructure sector. “While the speed of ultimate decarbonisation remains unclear, there appears to be a real opportunity for multi-decade investment in infrastructure as every country moves towards a cleaner environment,” she said.  

The rise of technology is also supporting rising investment in infrastructure. “The explosive growth in data consumption is fueling significant investment opportunities for infrastructure owners globally. Artificial intelligence and cloud computing, for example, demand huge infrastructure investment to support their growth.” 

In terms of individual markets, Ms Shaw believes certain regions offer greater relative upside at present. 

“We have started the year overweight in Europe and emerging markets. We also see opportunities in China given equities are trading at a historic valuation discount.  

“Continued policy support remains the upside risk for China in 2024. While it’s hard to see a quick fix for China given the challenges facing the property sector, along with the trust sector and shadow bank issues, increasing savings rates and weak confidence, the market has priced this in and valuations look very cheap,” Ms Shaw said.  

Robust travel momentum also remains a positive for infrastructure. “Travellers seem willing to give up other forms of discretionary spend amidst cost-of-living pressures in order to continue investing in travel and associated experiences. While we expect the pace to slow, we continue to position for solid travel demand into 2024,” she said.  

Ms Shaw also sees a growing opportunity in the North American utility space.  

“This sub-sector has been the most adversely impacted by the rate environment. As such a reversal in rate trend is expected to be a catalyst both in terms of fundamental earnings and market sentiment. We are watching this closely” said Ms Shaw.  

Some short-term challenges, however, remain on the horizon. The ongoing Israel-Hamas and Russia-Ukraine wars, and the China-Taiwan conflict, could all impact markets in 2024.  

“These continue to have potential impacts on agricultural and energy markets.  The Israel conflict is set to become a bigger issue if it is not contained to Hamas, Gaza and Hezbollah. If Iran has any direct role, it could impact oil prices much more, both directly and via trade through the Strait of Hormuz which is already under heightened alert,” she said. 

Separately, with so many elections around the globe in 2024 and rising populism, these are risks for economies and investors.  “With elections, comes the rise of the populist rhetoric. From an economic perspective, the key issue is that populism leads to the development and attempted implementation of poor economic policy. 

“We remain conscious of the volatile economic environment as well as the 2024 political overhangs, and we’re positioning accordingly. However, macro uncertainty and geopolitical tensions can also create unjustified market volatility and noise. We look to separate the resilience of the infrastructure asset class from this noise, and we remain optimistic about the long-term fundamentals underpinning the infrastructure investment case,” Ms Shaw said. 

4D prioritises investment in infrastructure companies with strong leadership, defined strategic goals that integrate with a sustainability policy, strong balance sheets and those that are best-in-class within their sectors. “We believe that with active management, a listed infrastructure equity portfolio can be positioned to take advantage of the long-term structural opportunity, as well as whatever near-term cyclical events may prevail – whether they be environmental, political, economic or social,” Ms Shaw said. 

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Tim Snelgrove

While China is facing an economic slowdown, and consumer and business confidence has weakened, signs of stabilisation could point to more positive signs ahead supporting a potential outperformance of the nation’s listed infrastructure operators, according to 4D Infrastructure investment director, Tim Snelgrove.

Domestic activity on toll roads and domestic air travel are already above 2019 levels, while the easing of COVID-19 travel restrictions and the introduction of greater airline capacity within key travel markets should positively impact traffic in China and for global airport operators, according to Snelgrove.

He says other sectors could also benefit from the nation’s stronger economic growth compared to developed nations.

“Despite the economic slowdown, infrastructure spending has proven to be a bright spot – encouraged by new directives from the politburo, local Chinese governments have accelerated the pace of borrowing for infrastructure investment in an effort to offset weakness in private business investment and property,” Snelgrove says.

“As an asset class, infrastructure has a number of unique characteristics that makes it an attractive option for investors across all points of the economic cycle. Given the huge population in China and its ongoing evolution, we believe it remains an important destination for investors,” he says.

“Despite the recent dip in market sentiment, China’s middle class is huge and still growing, and changes in spending and consumption patterns will have significant implications for infrastructure investment for decades to come as government meets demand and builds the infrastructure needed by its population.”

The economic recovery in 2023 has stalled, and despite some recent positive signals, Chinese equities are trading at multi-cycle low valuations.

“Some stocks are trading as if the re-opening never happened. The expectation of a pent-up consumption wave has been replaced by a more cautious household approach, marked by a higher savings rate. The drivers of low household confidence and spending are mostly related to the wealth effect of a deteriorating property market.”

The property sector in China accounts for 30 per cent of GDP and 70 per cent of household wealth. House prices have been falling, with unofficial sources indicating 15 per cent to 25 per cent drops in some cities. Any further signs of stress in the property market will have a detrimental effect on consumer confidence, according to Snelgrove.

“However, the Chinese government should realise that stabilising the property market is crucial to shifting the consumer mindset towards a more spending-oriented approach, not just in the short term, but as part of a long-term transition from heavy investment and export-driven growth to domestic consumption and value-added sectors. The government is therefore prioritising boosting consumer sentiment and spending over pursuing indiscriminate growth, especially given the significantly higher Chinese government debt compared to previous periods of stimulus.”

In terms of individual sectors, he says the recovery in travel demand in China has been mixed.

“Domestically, flights are now above pre-pandemic levels, while, as at October, international travel is under 60 per cent of pre-pandemic levels. The slower-than-expected international recovery is due to the slow easing of visa and group tour restrictions.

“Flight capacity has also been patchy regionally, and highly political, with capacity negotiated bilaterally between countries. However, we believe the demand is coming back. As consumer confidence increases, we expect an increase in Chinese tourists in European and Asian airports. European operator, Fraport, highlighted that there had been a steady recovery since re-opening from 18 per cent of pre-pandemic levels in January, to 52 per cent in June, with expectations this will continue to ramp up in the second half of the year and return to 90 per cent of its pre pandemic level of business.”

In the Chinese toll road sector, he says network traffic is now exceeding pre-COVID levels at 100 per cent to 120 per cent. Some government policies on consumption are also benefiting the sector, such as reducing the tax on passenger vehicles and increasing subsidies for electric vehicles, according to Snelgrove.

“The gas sector has fundamentally been slower to rebound. There has been some loss in volume growth given the slower economic activity, especially for those exposed to factories and manufacturing regions. There is also an impact from the slowing property market and a loss of new-connection revenue. However, the market has completely over-discounted what we believe to be short-term shocks, and the sector is currently offering very attractive value.”

Within 4D’s investment universe of core infrastructure, including airports, ports, toll roads and utilities, 4D believes that sell off has been overdone.

“We continue to be highly selective in our portfolio and continue to invest on fundamental value and assess investment opportunities that are beneficiaries to the Chinese economy, both directly and indirectly.

“At 4D we have an integrated process for investment, whereby country risk analysis is combined with individual stock analysis in a single analytical cycle. An investor willing to capitalise on the opportunity via direct investment in China is currently accessing this theme at very attractive valuations, both on an absolute basis – compared to their developed peers – but also relative to historical ranges,” Snelgrove says.

“We expect further outperformance as the market starts to recognise the disconnect between share price and fundamentals.”

The 4D Emerging Markets Infrastructure Fund returned 19.55 per cent over the 12 months to 30 June 2023, compared to the absolute benchmark’s 15.43 per cent^[1].

————

[1] Performance figures are net of fees and expenses. Benchmark is the OECD G20 Inflation Index + 8%. Past performance is not indicative of future performance.

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Tim Snelgrove

4D Infrastructure has appointed Tim Snelgrove to the role of investment director, effective 29 May 2023. He will be based in Sydney and will report to chief investment officer, Sarah Shaw.

Mr Snelgrove has 14 years of finance experience, including 12 years in global listed infrastructure funds as an analyst, portfolio manager and head of trading. Prior to joining 4D, he founded and ran a long short global listed infrastructure hedge fund at Coaster Capital that focused on additional sources of return in the sector and greater risk management tools in the investment process.

Before this, Mr Snelgrove spent more than a decade at RARE Infrastructure (now ClearBridge Investments). He was involved in the early development of the business, worked as an analyst covering Australian infrastructure stocks and led the global trading desk from Sydney and London – responsible for enhancing best practices across regulatory developments, market microstructure, technology and portfolio market intelligence. He was a contributor across investment committees and the macro advisory board and also managed a derivative overlay product for income strategies for several years.

Prior to his experience in global listed infrastructure funds, he worked at Merrill Lynch as an analyst on the hedge fund sales desk.

Ms Shaw said Mr Snelgrove’s wealth of experience in listed infrastructure and general market intelligence made him well suited to the 4D investment team.

“Heading into 2023, we continue to see the growing need for infrastructure assets globally and exciting investment themes across the asset class.

“Tim’s appointment comes as we look to increase the depth and strength of our investment team as 4D moves forward in its next stage of development.

“He brings a complementary skill set to the team with his strong background in dealing and asset allocation, and will be a valuable asset to 4D. I look forward to working with Tim again,” said Ms Shaw.

Mr Snelgrove has a Bachelor of Commerce (Liberal Studies) majoring in Accounting, Finance and Government & International Relations from the University of Sydney and holds a Chartered Alternative Investment Analyst (CAIA) designation.

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