Daily Europe

14 August 2026, 04:30 UTC Chief Investment Office GWM Investment Research

Infrastructure: A more compelling investment case as Germany spends UBS House View - Daily Europe Mark Haefele, Global Wealth Management Chief Investment Officer, UBS Switzerland AG Matthew Carter, Strategist, UBS AG London Branch Maelle Quillevere, Economist, UBS AG London Branch Antoinette Zuidweg, Alternative Investments Strategist, UBS Switzerland AG Dean Turner, Economist, UBS AG, UBS AG London Branch Themis Themistocleous, Head Chief Investment Office EMEA, UBS AG London Branch

From the studio What to watch: 14 August Podcast: AI’s impact on the economy, Fed, and portfolios, on Apple • Eurozone second-quarter GDP growth and Spotify (7 mins) rate Video: Three reasons why we find Japanese equities attractive (6 mins) • US July retail sales Video: CIO’s James Cheo on the case for Singapore equities (5 mins) • US Michigan Consumer Sentiment Index in August Thought of the day Germany’s fiscal prudence and recent intentions to spend more have garnered significant attention among European investors. In early July, the nation’s government announced more concrete plans on how it would turn rhetoric into results.

Draft plans for the 2027 budget showed an increase in investment spending to ensure that it remains above 10% of total expenditure, In addition, it announced that spending on its infrastructure and climate-neutrality funds would also rise this year compared wih last year. These latest fiscal plans also feature a more expansionary path through 2030 compared with last year’s plan.

While total investment spending remains behind target, further acceleration is expected later this year when regional governments increasingly tap into their allowances. So far, the bulk of the investment is dedicated to transport infrastructure, which was front-loaded in 2026, with investment in research and development and digitization set to pick up in the years ahead.

These regional developments, in our view, bolster the case for investing in infrastructure—the essential facilities and systems that support the functioning of a society. It includes transportation, communications, water supply, and energy systems. Their markets are often difficult for new companies to access due to high initial costs. Existing infrastructure builders often have high pricing power. The present macroeconomic environment may lend itself to reviewing infrastructure—especially for underexposed investors:

Infrastructure can benefit from structural growth trends. Secular trends—including global population growth, AI proliferation, supply chain

This report has been prepared by UBS Switzerland AG, UBS AG London Branch. Please see important disclaimers and disclosures at the end of the document.

realignment, the drive for energy security, and the push for net-zero carbon emissions—are expected to drive over USD 100 trillion in cumulative infrastructure spending by 2040 across the transportation, energy, digital, and social sectors (based on McKinsey's analysis).

Infrastructure can withstand an uncertain world. Ongoing tensions in the Middle East, the upcoming US midterm elections, and potential setbacks in AI investment remain key risks to the macroeconomic backdrop and inflation. In this environment, infrastructure assets stand out for their resilience. Many offer stable, inflation-linked cash flows that help mitigate the impact of slower economic growth and sticky inflation. Cambridge Associates data show infrastructure-linked assets returned 10.9% in 2025 and an average of 10.8% annually over the last 10 years.

The asset class can help smooth and diversify portfolio returns. Infrastructure assets come with diversification benefits: The asset class’s correlation with a traditional 60/40 stock-bond portfolio has declined to approximately 30% in recent years. Additionally, infrastructure’s low correlation with gold makes it a compelling complement for portfolio diversification, in our view. In the current environment, we see core and core-plus infrastructure assets in non-cyclical sectors as the most attractive. We believe they offer robust, predictable, and inflation-protected income streams, making…