With less than a week to go until the fateful US presidential elections, investors are on tenterhooks, as the election results could change the course of the global markets dramatically. Donald Trump has surprised the world with a shocking comeback after it looked like he was toast following the final debate and criticism over some of his comments regarding women. However, after FBI director James Comey announced reopening the investigation into Hillary Clinton’s email scandal, Trump has staged a comeback in the polls.
The latest poll from ABC News and the Washington Post shows that Trump has a one-point lead over Hillary. A change in the Oval Office influences the stock market heavily due to policy changes enacted by the leader of the free world. In this article, we’ll take a look at the ETFs which are likely to perform well should Donald Trump, against all odds, become the President of the United States of America.
Through extensive research that covered the portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details).
Defense ETFs Likely to Flourish Under Trump
Donald Trump has clearly communicated his intentions to increase military buildup both at home and abroad, which will favor Defense and Aerospace industry ETFs, including the iShares Dow Jones US Aerospace & Def.ETF (NYSEARCA:ITA) and the PowerShares Aerospace & Defense (ETF) (NYSEARCA:PPA). Mr. Trump has plans to initiate a strong border patrol on the U.S.-Mexican border, initiate land operations in the Middle East, and increase spending to revamp the United States’ defense infrastructure. In a speech at the Union League of Philadelphia in September, Trump vowed to abolish the defense budget cuts enacted in 2013. Without those limitations, analysts think the defense budget could go up by $500 billion over the next ten years. The presidential candidate also wants to modernize the country’s next-generation warfare program, add 90,000 new troops, and build 75 new warships.
iShares Dow Jones US Aerospace & Def.ETF (NYSEARCA:ITA), a Pennsylvania-based $876 million ETF, tracks the Dow Jones U.S. Select Aerospace & Defense Index, which consists of all the major companies involved in the manufacturing of defense equipment, including Boeing Co (NYSE:BA), Lockheed Martin Corporation (NYSE:LMT), and Lockheed Martin Corporation (NYSE:LMT). The iShares Dow Jones US Aerospace is up by over 8.6% year-to-date.
The PowerShares Aerospace & Defense (ETF) (NYSEARCA:PPA) is an Illinois-based ETF which tracks the SPADE Defense Index. The Fund normally invests at least 90% of its total assets in common stocks that comprise the Index. The ETF is up by over 6% year-to-date. Boeing and Lockheed Martin also feature prominently in this ETF.
On the next page, we’ll discuss some other ETFs which have huge growth potential under a Donald Trump presidency.
Investors Could Stash Gold in an Uncertain Time
Investors are piling into gold, the most important safe-haven asset, amid uncertainty surrounding the U.S. elections. Analysts think that Gold ETFs such as the SPDR Gold Trust (ETF) (NYSEARCA:GLD) and iShares Gold Trust (ETF) (NYSEARCA:IAU) are set for big gains if Trump takes over the Oval Office, due to the uncertainty of his policies and his hostile approach against the Chinese devaluation of its currency for the purposes of expanding its exports. Trump also plans to clear the national debt by printing more money, which will make gold even more valuable compared to the Dollar. Donald Trump’s presidency is also expected to cause a slowdown in the U.S. economy, due to a proposed $10 trillion in tax cuts, protectionist policies, and high tariffs on Chinese and Mexican imports. According to the ABN Amro, gold could skyrocket to $1,850 if Trump assumes the Presidential mantle.
The SPDR Gold Trust (ETF) (NYSEARCA:GLD) added a whopping $12.2 billion worth of new gold assets to its portfolio in the first-half of 2016. The ETF is up by over 21% so far this year, while the iShares Gold Trust (ETF) (NYSEARCA:IAU) is up by over 21% year-to-date.
Infrastructure ETFs Could Also Thrive If Trump Gets Elected
The Materials Select Sector SPDR (NYSEARCA:XLB) is a Massachusetts-based ETF which tracks the Materials Select Sector Index. The ETF has huge prospects in the event that Donald Trump wins the election.
The Don has repeatedly complained about the deteriorating infrastructure of his home country, and has pledged to spend billions to remedy it. Trump’s biggest talking point in the campaign has been his plan to build a 50-foot wall on the border of Mexico which will stretch some 2,000 miles. Analysts estimate that this project could cost anywhere between $15 billion and $25 billion. Trump, having a lot of experience in the industry, also plans to upgrade and build roads, bridges and airports. Back in August, Hillary Clinton also vowed to spend $275 billion over the next five years on infrastructure, should she become President. Trump responded with a promise that he would spend double the amount which Hillary proposed.
The Materials Select Sector focuses on companies from the chemicals, metals, mining, packaging, and construction sectors. It is the largest materials ETF in terms of assets. The ETF has gained 9.1% so far this year, beating the S&P 500 by 320 basis points.
Disclosure: None
