“There's no sign that this global infrastructure boom is slowing at all.”
Jeffrey Immelt, CEO, General Electric (GE) 

China, India and other growing economies are complete beginners in building their basic infrastructure needs. To gain perspective on where they are today it helps to think back to the early stages of development in the U.S. The eighteenth century got the ball rolling, but the explosion in activity was yet to come. Roads, bridges, ports, facilities and power plants had to be built quickly to keep pace with America’s rapid growth.

Simon Kuznets, a Russian-born economist and a Nobel Prize winner in Economics in 1971 explains it best in one of his theories, known as the “Kuznets cycle.” He postulates that developing economies go through a period of infrastructure boom that lasts 15 to 20 years. During these years, the intense need for infrastructure creates jobs; the new jobs fuel wealth creation; and the newly created wealth fuels more infrastructure demand in a continuous feedback loop.

The Kuznets cycle years are profitable because of the strong return on investment infrastructure provides. For example, think about President Eisenhower’s big push for an interstate highway system in the 1950s. Considering how heavily America now relies on its interstate links, that highway system was a wise investment.

Emerging markets can see a similar level of return on investment for the basics they're now building. Trillions of dollars will be spent on infrastructure projects ranging from power plants, roads and bridges to schools, terminals and ports. There will be ample opportunities in this sector.

Take a look at a long term Dow Jones Industrial Averages chart – which dates back to 1896 – and you can get a sense of what’s possible for emerging markets today. I want to own infrastructure plays for the long term.