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Investors are increasingly wagering on a likely Republican return to power, particularly after the attempted assassination of Donald Trump at a Pennsylvania rally.
Investors anticipated a change in fiscal and trade policies under Trump administration which may spur economic growth. The yield on 30-year bonds surpassed that of two-year equivalents for the first time since January, resulting in a steeper yield curve. Simultaneously, the dollar strengthened against most currencies, Bitcoin surged above $60,000, and S&P 500 futures for September rose by 0.4%.
The series of wagers — based on anticipation that the Republican’s return to the White House would usher in tax cuts, higher tariffs and looser regulations — had already been gaining ground. Fredrik Repton, a senior portfolio manager for global fixed income and currencies at Neuberger Berman, commented on the trend, which is Trump trade and a “curve steepener. It looks like we will see more term premium in the markets going forward, as quoted on Bloomberg.
Priya Misra, portfolio manager at JPMorgan Investment Management, noted, "Political risk is inherently difficult to hedge, and uncertainty remains elevated given the tight race. This development increases the likelihood of a Republican sweep, possibly exerting pressure on the yield curve," per a Bloomberg article.
Let’s find out which areas would likely to gain amid a likely Trump era.
Banks to Benefit
Trump likes low rates. The Fed is also likely to cut rates ahead. This would steepen the yield curve and help bank ETFs. Trump also favors deregulation in the banking sector. SPDR S&P Bank ETF (KBE - Free Report) and Invesco KBW Regional Banking ETF (KBWR - Free Report) are two ETFs to keep a track on.
Fossil Fuel to Gain
Taking a completely difference stance from president Biden, Trump pushes for more fossil fuel generation, be it from crude oil, natural gas or coal. This in turn may hit low carbon and clean ETFs like iShares MSCI ACWI Low Carbon Target ETF (CRBN - Free Report) and First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - Free Report) while fossil fuel related stocks and ETFs like Energy Select Sector SPDR ETF (XLE - Free Report) should gain.
Buy American and Hire American
Since small caps generate most of their revenues from the domestic market, they are more closely tied to the U.S. economy and its increased hiring. These have lower foreign exposure and are thus less impacted by global growth slowdown. This will make small-cap ETFs like iShares Russell 2000 (IWM - Free Report) winners.
Also, with Trump has tendency to bring U.S. manufacturing jobs back to the country and strictly oppose outsourcing, First Trust RBA American Industrial Renaissance ETF (AIRR - Free Report) – which focuses on small- and mid-cap U.S. industrial and community banking companies – is expected to benefit.
Large-Cap Growth to Gain?
Trump favors tax cuts. Most analysts say that big corporates will benefit from these tax cuts. Large-cap growth ETFs like iShares Russell 1000 Growth ETF (IWF - Free Report) is a likely beneficiary. Notably, large-cap stocks have considerable foreign exposure and are thus beneficiaries of such bills.
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Trump Trade Gaining Momentum: ETFs in Focus
Investors are increasingly wagering on a likely Republican return to power, particularly after the attempted assassination of Donald Trump at a Pennsylvania rally.
Investors anticipated a change in fiscal and trade policies under Trump administration which may spur economic growth. The yield on 30-year bonds surpassed that of two-year equivalents for the first time since January, resulting in a steeper yield curve. Simultaneously, the dollar strengthened against most currencies, Bitcoin surged above $60,000, and S&P 500 futures for September rose by 0.4%.
The series of wagers — based on anticipation that the Republican’s return to the White House would usher in tax cuts, higher tariffs and looser regulations — had already been gaining ground. Fredrik Repton, a senior portfolio manager for global fixed income and currencies at Neuberger Berman, commented on the trend, which is Trump trade and a “curve steepener. It looks like we will see more term premium in the markets going forward, as quoted on Bloomberg.
Priya Misra, portfolio manager at JPMorgan Investment Management, noted, "Political risk is inherently difficult to hedge, and uncertainty remains elevated given the tight race. This development increases the likelihood of a Republican sweep, possibly exerting pressure on the yield curve," per a Bloomberg article.
Let’s find out which areas would likely to gain amid a likely Trump era.
Banks to Benefit
Trump likes low rates. The Fed is also likely to cut rates ahead. This would steepen the yield curve and help bank ETFs. Trump also favors deregulation in the banking sector. SPDR S&P Bank ETF (KBE - Free Report) and Invesco KBW Regional Banking ETF (KBWR - Free Report) are two ETFs to keep a track on.
Fossil Fuel to Gain
Taking a completely difference stance from president Biden, Trump pushes for more fossil fuel generation, be it from crude oil, natural gas or coal. This in turn may hit low carbon and clean ETFs like iShares MSCI ACWI Low Carbon Target ETF (CRBN - Free Report) and First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - Free Report) while fossil fuel related stocks and ETFs like Energy Select Sector SPDR ETF (XLE - Free Report) should gain.
Buy American and Hire American
Since small caps generate most of their revenues from the domestic market, they are more closely tied to the U.S. economy and its increased hiring. These have lower foreign exposure and are thus less impacted by global growth slowdown. This will make small-cap ETFs like iShares Russell 2000 (IWM - Free Report) winners.
Also, with Trump has tendency to bring U.S. manufacturing jobs back to the country and strictly oppose outsourcing, First Trust RBA American Industrial Renaissance ETF (AIRR - Free Report) – which focuses on small- and mid-cap U.S. industrial and community banking companies – is expected to benefit.
Large-Cap Growth to Gain?
Trump favors tax cuts. Most analysts say that big corporates will benefit from these tax cuts. Large-cap growth ETFs like iShares Russell 1000 Growth ETF (IWF - Free Report) is a likely beneficiary. Notably, large-cap stocks have considerable foreign exposure and are thus beneficiaries of such bills.